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Automotive Component Supplier BorgWarner to Buy Delphi Technologies for $1.5 Billion

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【Summary】Global automotive supplier BorgWarner Inc. announced announced that they have entered into a definitive transaction agreement under which it will acquire rival Delphi Technologies in an all-stock transaction for $1.5 billion. The transaction of the two major auto suppliers represents one of the biggest mergers in the automotive industry in recent years.

Eric Walz    Jan 28, 2020 11:55 AM PT
Automotive Component Supplier BorgWarner to Buy Delphi Technologies for $1.5 Billion

As automakers begin building more electric vehicles, many of the world's biggest Tier 1 suppliers are making the transition along with them, forming new partnerships and moving away from producing mechanical parts for internal combustion engine vehicles and shifting towards electric powertrain components.

Global automotive supplier BorgWarner Inc. announced announced that they have entered into a definitive transaction agreement under which it will acquire ri Delphi Technologies in an all-stock transaction that will value the new enterprise at approximately $3.3 billion. The news of the deal was first reported by Bloomberg.

The transaction of the two major auto suppliers represents one of the biggest mergers in the automotive industry in recent years.

Under the terms of the agreement, which has been approved by the boards of directors of both companies, Delphi Technologies stockholders would receive a fixed exchange ratio of 0.4534 shares of BorgWarner common stock per Delphi Technologies share. 

Current BorgWarner stockholders are expected to own approximately 84% of the combined company, while current Delphi Technologies stockholders are expected to own approximately 16%.

"This is a compelling transaction that we are confident delivers clear benefits to our stakeholders," said Richard F. Dauch, CEO of Delphi Technologies.

BorgWarner plans to 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.

Delphi was the former parts arm of General Motors before spinning-off in 1999. It is one of the world's largest manufacturers in the automotive industry today. The company has acquired or invested in various companies that specializes in electric architecture or autonomous or connected technology over the past eight years.

For years, both companies specialized in developing automatic transmissions for combustion engine vehicles. However, BorgWarner has been expanding its product portfolio by producing more components for electric and plug-in hybrid vehicles.

As automakers produce more battery-powered vehicles, 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 to Reuters.

"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.

Following the close of the transaction, the combined company is expected to be one of the leading electric powertrain companies globally, with more comprehensive portfolio of products hybrid and electric vehicles, as well as remaining a leading component supplier for combustion engine vehicles.

"Delphi Technologies' portfolio is highly complementary to BorgWarner's, and together we plan to create a pioneering propulsion technologies company uniquely equipped to serve OEMs and aftermarket customers around the world." Lissalde added.

In December 2017, Delphi announced the spin-off of its powertrain division, forming two separate companies, Delphi Technologies and Aptiv. Aptiv remains focused on driverless technology, connected infrastructure for cities and other mobility solutions.

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