Auburn Hills’ BorgWarner and Delphi Technologies today announced they have entered into a definitive agreement under which BorgWarner will acquire Delphi in an all-stock transaction that values Delphi’s enterprise value at about $3.3 billion.
The transaction is expected to close in the second half of 2020 subject to approval by Delphi’s stockholders, customary closing conditions, and receipt of regulatory approvals.
Following the closing, the combined company will be led by Frédéric Lissalde, president and CEO of BorgWarner, and Kevin Nowlan, CFO of BorgWarner. It will operate as BorgWarner and be headquartered in Auburn Hills. Delphi has a customer technical center in Troy, while its parent company is based in London.
“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,” says Lissalde. “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.”
Under the terms of the agreement, which was approved by the boards of both companies, Delphi stockholders would receive a fixed exchange ratio of 0.4534 shares of BorgWarner common stock per Delphi share. Upon closing of the transaction, current BorgWarner stockholders are expected to own about 84 percent of the combined company, while current Delphi stockholders are expected to own about 16 percent.
“This is a compelling transaction that we are confident delivers clear benefits to our stakeholders,” says Richard F. Dauch, CEO of Delphi. “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.
“BorgWarner’s team shares our focus on addressing today’s and tomorrow’s challenges, and the combination will create exciting opportunities for our employees. We also expect our stockholders will benefit from the opportunity to participate in the future growth and upside potential of the combined company.”
In fiscal year 2019, BorgWarner and Delphi estimate they generated $10.17 billion and $4.36 billion in net sales, respectively. The combined company is expected to be one of the leading pure-play propulsion companies globally, serving light and commercial vehicle manufacturers and the aftermarket. It will offer a portfolio of propulsion products and systems across combustion, hybrid, and electric.
“We have a great deal of respect for Delphi Technologies’ team around the world and look forward to welcoming them to BorgWarner,” Lissalde says. “We are confident that together we will be able to move faster to address market trends toward electrification.”
Bringing the two companies together is expected to strengthen BorgWarner’s power electronics products, capabilities, and scale, creating a leader in electrified propulsion systems; enhance BorgWarner’s combustion, commercial vehicle, and aftermarket business; and realize run-rate cost synergies of about $125 million by 2023.
BorgWarner also has authorized a share repurchase program of up to $1 billion to be executed over the next three years. This is consistent with the company’s past approach to capital allocation. The timing and amount of any share repurchases will be based on market conditions, share price, and other factors.
BofA Securities Inc. and Rockefeller Financial LLC acted as financial advisers to BorgWarner, and Simpson Thacher and Bartlett LLP acted as its legal adviser. Goldman Sachs International acted as financial adviser to Delphi, and Kirkland and Ellis LLP acted as its legal adviser.