BorgWarner will acquire rival automotive supplier Delphi Technologies in an all-stock transaction valued at $3.3 billion.
“The acquisition would strengthen BorgWarner’s power electronics products, capabilities and scale,” the companies say in a statement issued Tuesday morning. “Combining with Delphi Technologies is consistent with BorgWarner’s evolution towards the propulsion market of the future and would enable BorgWarner to maintain flexibility across combustion, hybrid and electric propulsion (systems).”
Under terms of the agreement, Delphi stockholders will receive a fixed-exchange ratio of 0.4534 shares of BorgWarner common stock per Delphi Technologies share. Upon closing of the transaction, current BorgWarner and Delphi stockholders are expected to own 84% and 16%, respectively, of the combined company. The transaction is expected to close in the second half.
BorgWarner sales totaled nearly $10.2 billion in fiscal 2019, while Delphi recorded nearly $4.4 billion in sales.
The combined company will operate as BorgWarner and be headquartered in Auburn Hills, MI. It will be led by BorgWarner President and CEO Frederic Lissalde (left) and Kevin Nowlan, BorgWarner’s chief financial officer.
“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,” Lissalde says.
“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,” he says.
“Delphi Technologies’ portfolio is highly complementary to BorgWarner’s,” Delphi CEO Richard Dauch (below, left) says, “and together we plan to create a pioneering propulsion technologies company uniquely equipped to serve OEMs and aftermarket customers around the world.”
The combined company will offer customers a suite of integrated and standalone offerings of power electronics products including high-voltage inverters, converters, on-board chargers and battery-management systems and capabilities including software, systems integration and thermal management, the companies say.
Parts for hybrids and EVs account for 50% of the company’s order backlog for the next three years, BorgWarner said in January 2018. But roughly 50% of the supplier’s revenue still comes from ICE components such as turbochargers, variable cam timing devices and exhaust-gas-management systems as well as transmission technologies.
Delphi Automotive was General Motors’ parts-making subsidiary until it was spun off in 1999. It spun off its powertrain business and named it Delphi Technologies in 2017. The remaining electronics business continues as Aptiv, which designs and produces electronic systems, advanced safety technologies and components for autonomous vehicles.
BorgWarner expects the combined company to realize cost synergies of approximately $125 million by 2023 driven primarily by non-production and procurement savings. These savings are incremental to Delphi’s and BorgWarner’s current cost-reduction plans. BorgWarner also expects significant long-term revenue synergies mainly from offering more-integrated electrified products.
Auburn Hills-based BorgWarner has manufacturing and technical facilities in 67 locations in 19 countries and employs about 30,000 people worldwide. London-based Delphi operates technical centers, manufacturing sites and customer-support service centers in 24 countries and employs more than 21,000 people globally.