ZF’s $13.5bn deal for TRW creates second largest car parts supplier

ZF Friedrichshafen has agreed to acquire US rival TRW Automotive for $13.5 billion, including debt, as the German car parts supplier looks to build global scale and secure access to technology for self-driving vehicles.

Both companies’ boards have approved the transaction, which would create the world’s second-largest car component maker by revenue, with about €30 billion ($41 billion) in annual sales and 138,000 employees. TRW shareholders and regulators must first approve the deal, which was unveiled.

Some two months after ZF first confirmed it had made an approach for the US group, the privately-held German company said it would pay $105.60 for each TRW share, valuing the US group’s equity at $12.4 billion. That represents a premium of 16 per cent over TRW’s undisturbed stock price on July 9th.

Stefan Sommer, ZF chief executive, said he viewed driver assistance systems and autonomous driving as a key source of future growth, alongside fuel efficiency where the company is already well positioned.

TRW’s product portfolio includes video cameras and radar, which are among the building blocks of self-driving cars.

The deal will more than double ZF's sales in China and the US, complementing its already large presence in Europe.

Earlier yesterday Germany's Bosch, the world's largest car components maker by sales, said it would take full control of its electric steering systems joint venture with ZF, called ZF Lenksysteme, by buying out its partner.

ZF's exit from the Bosch JV was important in its pursuit of TRW, as both have a large presence in electric steering systems and a combination may have prompted antitrust concerns. With new entrants such as Google breathing down their necks, car parts suppliers cannot afford to miss out on the emerging market for autonomous vehicle technology. – Copyright 2014 The Financial Times Ltd