BorgWarner Inc on Tuesday agreed to buy U.K.-based Delphi Technologies Plc in a $3.3-billion deal, as the U.S. auto-parts maker positions itself to grab more sales in the fast-growing market for hybrid and electric vehicles.
The acquisition, BorgWarner’s biggest merger in at least a decade, will add Delphi’s expertise in power electronics and expand its own portfolio as the auto industry makes a wider range of vehicles that focus on clean technology.
Both companies specialize in auto transmissions, but BorgWarner - the larger of the two with annual revenue of more than $10 billion, has been expanding its products for electric vehicles.
The company last year bought a 20 per cent stake in battery packs supplier Romeo Power. Some of BorgWarner’s other products include electric motors, battery heaters and onboard battery chargers.
“Technology was the drive for this transaction,” BorgWarner Chief Executive Officer Frederic Lissalde said, as the automobile industry moves away from traditional gas powered cars towards cleaner options.
Global carmakers and their suppliers are forging alliances to develop electric and autonomous car technologies partly due to the huge financial and technical burdens, and as governments pressure them to roll out zero-emission vehicles to meet stringent anti-pollution rules.
As more automakers roll out electric cars, the Delphi deal will give BorgWarner broader advantages as it offers solutions across traditional internal combustion engines, hybrid and electric vehicle platforms, Jefferies analyst David Kelley said.
Delphi, which also makes electronic control modules that manage various powertrain components and other auto parts, said its shareholders will receive 0.4534 shares of BorgWarner for each share held. That translates to $17.39 per share, a premium of about 77 per cent to Delphi’s closing price on Monday.
The equity value of the deal is about $1.5 billion. Delphi had long-term debt $1.47 billion as of Sept. 30, 2019.
BorgWarner will own about 84 per cent of the combined company after the expected closing of the deal in the second half of 2020, the companies said.
The news was first reported by Bloomberg.
BorgWarner also announced a three-year share repurchase program of up to $1 billion. The company’s shares are down 6 per cent at $36 in morning trade. Shares of Delphi are up 62 per cent at $15.90.