On Tuesday morning, this week, BorgWarner Inc announced they have struck an all-stock acquisition with Delphi Technologies. The deal is worth approximately $3.3 billion and aims to unite the two auto suppliers at a time when the industry is shifting its focus towards hybrid and electric vehicles.
BorgWarner president and CEO Frederic Lissalde comments, “This exciting transaction represents the next step in BorgWarner’s balanced propulsion strategy, strengthening our position in electrified propulsion as well as our combustion, commercial vehicle and aftermarket businesses.”
The terms of this agreement has been approved by the leadership of both companies. In the deal, stockholders at Delphi Technologies will expect to receive 0.4534 shares of BorgWarner common stock per every share of Delphi Technologies they hold. This equates to roughly $1.6 billion of Delphi Technologies stock, in all.
Lissalde goes on to say, “Delphi Technologies will bring proven leading power electronics technologies, talent, and scale that will complement our hybrid and electric vehicle propulsion offerings. As a combined company, we look forward to delivering enhanced solutions to our customers while driving increased value for our stockholders.”
Both companies have engine and transmission businesses that analysts see as in decline. After all, carmakers are consolidating and investing in the future of automobiles. Obviously more and more companies are choosing to focus their capital on hybrid model design that will help to bridge the gap between traditional gasoline engines and battery power.
For the effort, this deal should help strengthen both companies’ already strong presence. Even before revealing the agreement, Delphi Technologies (NYSE: DLPH) had a market value of $844 million, with only $1.5 million in long-term debt. Similarly, BorgWarner (NYSE: BWA) has a value of about $7.9 billion.
Furthermore, when this transaction closes, current stockholders of BorgWarner shares are expected to own roughly 84 percent of the newly combined company. Of course, that means current Delphi Technologies shareholders will own about 16 percent of the new company.
At the end of the day, this will be among BorgWarner’s biggest deals. Its largest was the $950 million acquisition of Remy International back in 2015.