Global vehicle technology and component provider ZF Friedrichshafen AG announced on March 28 that it has entered into a definitive agreement to acquire Wabco Holdings Inc. for $136.50 per share. Wabco, based in Bern, Switzerland, is a global supplier of braking control systems and other solutions for commercial vehicles.
Under the terms of the deal, ZF will acquire Wabco for $136.50 per share, for a total equity value of approximately $7 billion.
The planned acquisition has been approved by Germany-based ZF’s Management Board and Supervisory Board and by Wabco’s Board of Directors. ZF stated in a press release that the merger will result in the formation of "a leading global integrated mobility systems provider for commercial vehicles, creating added value for ZF’s commercial vehicle customers." The combined company will have sales of approximately €40 billion ($45 billion).
“We believe that, together with Wabco, ZF can form the world’s leading integrated systems provider for commercial vehicle technology, creating long-term value and security for its customers, employees and owners,” said Wolf-Henning Scheider, CEO of ZF. “For ZF, the acquisition of a specialist and leader for commercial vehicle braking systems means adding a stable and growing business segment and enables our existing commercial vehicle division to expand its expertise in vehicle dynamics control. This will create the foundation for ZF to offer comprehensive systems for safe and automated mobility solutions for passengers and goods to our customers.
"This is also in the best interest of our owners, the Zeppelin Foundation and the Dr. Jürgen and Irmgard Ulderup Foundation, as the transaction will result in a sustainable strengthening of ZF," Scheider added.
Jacques Esculier, chairman and CEO of Wabco, was equally upbeat, noting that, “Joining forces with highly respected ZF will create a leading global technology company well positioned to capitalize on future demand for autonomous, efficient, and connected commercial vehicles. We have a long history of successful collaboration to develop innovative technologies with ZF with both companies sharing an uncompromising drive for excellence, passion for innovation, and exceptional customer focus.”
Combo of complementary business lines
The planned acquisition is part of ZF’s Next Generation Mobility strategy. It will expand the company’s reach to include commercial vehicle braking solutions for the first time. This, said ZF, will play a a central role in the development of automated driving functions – including emergency braking maneuvers for trucks and trailers.
"Following the acquisition, customers of both companies will have a partner in ZF who can offer them a fully integrated system approach, new drive systems for e-Mobility and autonomous driving functions," the company stated. ZF said it expects that automated driving functions will "primarily be implemented for commercial vehicles and in areas with low complexity and traffic (e.g. factory sites, airports, agriculture).
"The combination of both businesses is expected to further accelerate the development of new technologies to enable autonomous commercial vehicle functions, making ZF less dependent on the economic cycle of the passenger car industry," ZF also noted.
“The intended strategic acquisition of Wabco comes at a good time for ZF," said Konstantin Sauer, CFO of ZF. "Following the successful integration of TRW, ZF has significantly reduced its debt levels. In fact, we overachieved in delivering our debt reduction targets. Wabco is a healthy and growing company with a strong cash flow profile that makes it a seamless fit with ZF and supports the implementation of our strategy.”
“We are proud of Wabco's track record since becoming a stand-alone public company nearly twelve years ago, and we believe our early anticipation of industry dynamics and ongoing ability to innovate technology ahead of others are key contributors to our sustained differentiation and success,” Wabco's Esculier added. “We are therefore highly attuned to long-range competitive forces and their potential implications as the sector contemplates a future of autonomous, electric and connected vehicles.”
Looking ahead at the dynamic commercial vehicle market, Esculier said, “We see great opportunities ahead, but they will be more challenging to realize, It has become increasingly apparent that our industry will face a new level of strategic complexity and will attract new competition, including new entrants from outside the sector, able to bring unprecedented resources to the table. This demands Wabco make critical choices in the role it will play in the future industry value chain. Furthermore, it is anticipated that significant in house investment and new alliances will be necessary to address the full scope of required technologies for these new domains.
“Considering these factors, we strongly believe this is the appropriate moment to be joining forces with ZF, providing access to critical technology and the global size and scale to de-risk the return on investment required as the industry transforms," Esculier concluded. "And as a result it will realize certainty of value and liquidity for our shareholders."