ZF's acquisition of TRW may have just heated up the competition among suppliers to develop autonomous vehicle technologies.
In a $13.5 billion deal likely to intensify the race to bring autonomous driving technology to market, Germany’s ZF Friedrichshafen AG will acquire U.S. auto partsmaker TRW Automotive Holdings Corp.
The transaction will create the world’s second-largest automotive supplier, with combined sales of approximately $41 billion and 138,000 employees, the two companies said in a joint statement. The agreement was unanimously approved by TRW’s Board of Directors and ZF’s Supervisory Board and Management Board.
The ZF and TRW deal is expected to close early next year and the combined company “will be well positioned to capitalize on favorable megatrends” in the automotive industry by bringing together complementary product offerings and leading technology positions that serve high-growth areas such as fuel efficiency, increased safety requirements and autonomous driving, executives from the two companies said.
Stefan Sommer, ZF chief executive officer, said that TRW will continue to operate as a separate business division within ZF, which is based in Friedrichshafen, Germany.
“The acquisition of TRW fits perfectly into our long-term strategy,” he said. “We are strengthening our future prospects by enlarging our product portfolio with acknowledged technologies in the most attractive segments,” Sommer added.
ZF, founded in 1915, manufactures transmissions, axles and other parts for a variety of European and American automobile manufacturers. It had sales of about $23 billion in 2013 and has 72,643 employees in 26 countries.
TRW makes airbags, crash sensors and other auto safety components. It had sales of $17.4 billion in 2013, and employs more than 65,000 people. The company was spun out of the defense contractor Northrop Grumman in 2002.
“The Detroit area will remain a major business center…and we expect employees from both companies to benefit from the enhanced career opportunities at a larger, more diversified company,” Sommer added.
The acquisition price represents a premium of approximately 16% over recent trading for TRW stock.
The closing of the deal is subject to a vote by TRW stockholders, receipt of regulatory approvals and other customary closing conditions. The transaction is expected to be completed by the first half of 2015.
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The deal underscores the growing importance of automated driving in the forward planning of automakers and giant suppliers, such as Bosch, Continental and Delphi. TRW has been demonstrating its semi-automated “Highway Driving Assist” feature which enables automatic steering, braking and acceleration for highway speeds.
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Peter Lake, executive vice president, Sales and Business Development at TRW, said, “Progress towards semi-automated and automated driving has gained huge momentum over the last 12 to 18 months as the industry is recognizing the vast benefits it could deliver.”
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With distracted driving becoming a major concern and the majority of accidents being caused by human error, semi-automated systems could help to reduce fatalities and enhance the safety of passengers and other road users, Lake added.
“The first steps have already been taken to introduce semi-automated features such as traffic jam assist on production vehicles but we believe it will be some time before fully autonomous cars become commonplace. There is still a lot of work to be done, including determining legislative frameworks. At TRW, we’re following a building block approach showcasing what is achievable today using proven technology,” Lake said.