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ZF Enters Car-Parts Elite With $7 Billion Deal to Buy Wabco

ZF Enters Car-Parts Elite With $7 Billion Deal to Buy Wabco

(Bloomberg) -- ZF Friedrichshafen AG has agreed to buy Wabco Holdings Inc. in a deal worth about $7 billion that would put the car-parts maker on par with fellow German peers Robert Bosch GmbH and Continental AG.

ZF will pay $136.50 a share for Wabco, according to a statement Thursday, a 6.5 percent discount from the target’s Wednesday closing price, surprising investors who had bet on a higher offer. Shares of Wabco, which had risen in recent weeks after reports of the talks, plunged 10 percent to as low as $130.76 as of 10:20 a.m. Thursday in New York.

The planned acquisition is part of ZF’s strategy to “expand the company’s expertise to include commercial vehicle braking solutions for the first time,” it said. Wabco, a supplier of braking systems, and technologies for safety and connectivity of trucks, buses and trailers, generated $3.8 billion in sales last year and has 16,000 employees. Bloomberg News reported the agreement earlier Thursday.

ZF Enters Car-Parts Elite With $7 Billion Deal to Buy Wabco

ZF catapulted into the ranks of the world’s biggest car-parts manufacturers after the $12.9 billion takeover of TRW Automotive in 2015. Since then, the supplier industry has faced pressure to transform further through consolidation and spinoffs to tackle the generational shift to self-driving and electric vehicles, which risks making traditional components such as ZF’s transmissions obsolete.

Aside from braking technology, the deal hand ZF will Wabco’s emerging semi-autonomous technology for commercial trucks. The company has developed active safety systems to reduce accidents, such as 360 degree cameras, blind spot monitoring and collision avoidance systems, according to a December investor presentation.

Truckmakers with autonomous driving ambitions “will probably find it nearly impossible to circumvent the combined” companies, Piper Jaffray analyst Alexander Potter said in a note. The “valuation may seem low, but we think it’s fair,” he said, citing slumping profitability for Wabco and revenue growth that’s been driven by takeovers.

Airship Pioneer

ZF is owned by the Zeppelin Foundation, a legacy of airship pioneer Ferdinand von Zeppelin, and a private German family foundation. The company is increasingly pushing to develop its electronics expertise and plans to invest 12 billion euros over the next five years on electric and autonomous vehicle technology. It expects to close the Wabco deal early next year.

Wabco was founded by inventor George Westinghouse in 1869 with the creation of the Westinghouse air brake that was used to stop steam trains. To this day, more than one-third of its business is in braking systems.

JPMorgan Chase & Co. advised ZF while Goldman Sachs Group Inc. worked with Wabco.

--With assistance from David Welch.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net;Eyk Henning in Frankfurt at ehenning1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, ;Craig Trudell at ctrudell1@bloomberg.net, Elisabeth Behrmann

©2019 Bloomberg L.P.