Delphi Takeover: The $3.3 billion deal with BorgWarner

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Delphi Takeover: The $3.3 billion deal with BorgWarner

 

Key Points:

  • $3.3 billion in an all-stock transaction
  • $125 million savings expected in efficiency and procurement costs by 2023
  • 4534 shares of BorgWarner common stock per Delphi Technologies share
  • BorgWarner 84% ownership; Delphi Technologies 16% ownership

 

On Tuesday 28th January 2020, BorgWarner Inc. announced it will acquire fellow automotive supplier Delphi Technologies in an all-stock transaction, valuing Delphi Technologies’ enterprise value at approximately $3.3 billion.

 

Under the transaction terms agreed by both companies, Delphi Technologies stockholders will receive a fixed 0.4534 share of BorgWarner common stock per Delphi Technologies share. BorgWarner are expected to own 84% of the combined company, whilst Delphi Technologies owning 16%.

 

BorgWarner have stated that this transaction with Delphi Technologies will “bring proven leading power electronics technologies, talent and scale that will complement our hybrid and electric vehicle propulsion offerings” (Frédéric Lissalde, President and Chief Executive Officer of BorgWarner Inc).

 

With this new deal, BorgWarner aim to: “increase their power electronics products, capabilities and scale; enhance their combustion, commercial vehicle and aftermarket businesses; maintain flexibility across combustion, hybrid and electric propulsion; and deliver adjusted GAAP EPS accretion in the second full year after closing and meaningful cost synergies by 2023” (BorgWarner, 2020).

 

Ed Hammond, Bloomberg News, also suggested that BorgWarner’s takeover of Delphi Technologies is “a good way of keeping some exposure that [BorgWarner] already have to the combustion engine, and then adding in increased exposure to electrical vehicles and components…”.

 

Delphi Technologies PLC, headquartered in London, U.K., are a global leader in the development, design, and manufacture of vehicle propulsion systems and advanced aftermarket solutions. They offer services in electronic controls and software, power electronics, and internal combustion engine ignition, fuel, emissions, and air management products. Delphi Technologies was formed by the 2017 separation from Delphi Automotive, which became Aptiv (APTV), an automotive electronics and advanced safety technology company.

 

BorgWarner, based in Auburn Hills, Michigan, is an American worldwide automotive industry components and parts supplier formed in 1928 through founding companies Borg & Beck, Marvel-Schebler, Warner Gear and Mechanics Universal Joint. Their products include automatic transmissions, turbochargers, emissions technology and thermal control systems.

 

CEO Frédéric Lissalde also states that “By 2023, we estimate the breakdown of pro forma BorgWarner will be 63% in combustion, 29% in hybrid and 8% in electric… this 8% in electric would represent a 30% increase in BorgWarner’s standalone exposure to the electric market”.

 

BorgWarner had sales of $10.17 billion in fiscal 2019, while Delphi had sales of $4.36 billion. Both companies are forecasting savings of approximately $125 million in efficiency and procurement costs by 2023.

 

The deal is projected to be finalised in the second half of 2020.

 

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3 February 2020