TRW And Germany’s ZF Could Become The 2nd Largest Auto-Part Supplier

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TRW Automotive Holdings Corp., one of the world’s biggest car-safety equipment suppliers, has received a preliminary takeover approach from Germany’s ZF Friedrichshafen AG, in a bid to create the world’s second-largest auto-parts supplier by sales. TRW confirmed in a statement yesterday that it has received a preliminary, non-binding proposal, but did not mention the buyer to be. TRW retained that Goldman Sachs Group Inc. is on board as a financial adviser. ZF reported that no decision has been made as of now.

With the purchase of TRW, ZF would add technology, from air bags to collision sensors, that keeps drivers secure and to help them avoid crashes. The combination would create a company with almost $40 billion in annual sales, vaulting ZF to the No 2. spot among world’s largest auto-parts suppliers, rankings compiled by Automotive News show.

With what ZF and TRW each bring, they would have all the dynamics you would need under one roof to have a fully automated vehicle,” said Richard Hilgert, an analyst with Morningstar Inc.

TRW has allowed ZF to conduct some due diligence, but all details have been kept private. While no specific price has been discussed, closely held ZF values TRW at around $11 billion to $12 billion.

Source: Bloomberg

The company is evaluating the proposal as well as other strategic alternatives which may enhance stockholder value,” TRW said in a statement. There is no guarantee that the talks may lead to a deal, the company said. ZF won’t comment further on a possible acquisition until the talks have concluded, Martin Demel, a spokesman, said in the e-mailed statement.

Inside The Numbers

ZF currently ranks 9th among auto-parts suppliers, with TRW at 11th, Automotive News’s rankings show, based on last year’s sales. Combined, they could surpass Japan’s Denso Corp., which nearly had $35.8 billion in auto-parts sales in 2013, and ranked behind Germany’s Robert Bosch GmbH.

Currently, TRW shares are trading at record highs. a sale now would capitalize on a global rebound in the auto industry, Hilgert said.

TRW closed at $95.63 in New York, giving the company a market value of about $10.6 billion. The shares rose as much as 11.6 percent in intraday trade, after the companies confirmed the talks, extending gains made when Bloomberg reported them.

The best time for a seller is at the top of the market,” he said. “TRW is very conservative. I don’t think they’ll let it go for an inexpensive price.”