In a deal underscoring the growing importance of software in vehicles, Aptiv will spend $4.3 billion to acquire the software firm Wind River from a hedge fund, TPG Capital of Fort Worth, TX.
“The automotive industry is undergoing its largest transformation in over a century, as connected, software-defined vehicles increasingly become critical elements of the broader intelligent ecosystem,” says Kevin Clark, Aptiv president and CEO.
“With Aptiv and Wind River’s synergistic technologies and decades of experience delivering safety-critical systems, we will accelerate this journey to a software-defined future of the automotive industry,” says Clark (pictured, below left). “In addition, we are committed to further strengthening Wind River’s competitive position in the multiple industries it serves.”
Aptiv will finance the $4.3 billion transaction through a combination of cash and debt. The acquisition is expected to close mid-year 2022 and is subject to customary conditions, including regulatory approvals.
While Bank of America analyst John Murphy describes the valuation of the deal as “pricey” during a conference call, Clark says he is comfortable with the price tag, given Wind River’s expertise in the telecommunications, defense, aerospace and medical industries. Wind River generated about $400 million in revenues in 2021.
“Software is expensive,” Clark says, adding demand for vehicle software is expected to grow quickly by the middle of the decade. “We’re very comfortable with the valuation.”
The CEO notes access to Wind River’s software stack will enable Aptiv to deliver over-the-air updates and revenue-enhancing subscription services automakers plan to deliver in the future.
Aptiv already has teamed up with Wind River on automotive projects, setting the stage for the deal.
“Wind River has established itself as a worldwide leader in cloud-native, intelligent edge software that delivers the highest levels of security, safety, reliability and performance,” says Kevin Dallas, president and CEO of Wind River.
The acquisition of Wind River follows Aptiv’s display at 2022 CES in Las Vegas in which it emphasized its expanding software capabilities. The CES display, which featured a rolling chassis with advanced safety, infotainment, autonomous driving and user experiences, is a sample of the capability Aptiv can provide its customers, executives say.
“For years, the automotive industry has been evolving toward the software-defined vehicle, in which more features and functions are primarily enabled through software that can be updated quickly and easily. Tens of millions of lines of code power today’s vehicles – and yet the industry has only scratched the surface,” Aptiv notes in a white paper prepared for CES.
“Massive transformations in connectivity, autonomy and user experience are still to come, and each innovation will require complex software to run it.”
Wind River’s software enables the development, deployment, operation and servicing of mission-critical intelligent systems. The firm’s software portfolio spans the aerospace and defense, telecommunications, industrial and automotive markets and is anchored by Wind River Studio, a comprehensive cloud-native intelligent systems software platform that enables full product lifecycle management for edge-to-cloud use cases.
Besides the large software-defined mobility opportunity, the merger will allow Aptiv to diversify into high-value industries with Wind River’s intelligent systems software platform. The combination will enable multiple end-use innovations and applications. According to Aptiv, Wind River will continue to operate as a standalone business within Aptiv as part of the Advanced Safety & User Experience segment.
For Aptiv, the merger with Wind River represents another step for a company that grew out of what was once part of General Motors’ component operations.
GM spun off what was to become Aptiv as part of the Delphi spinoff in the late 1990s.
Delphi underwent a sweeping reorganization and ultimately filed for bankruptcy before the 2008 financial crisis.
After emerging from bankruptcy, Delphi split into two companies in 2018 with Aptiv retaining the intellectual property and technical capacity to build infotainment and autonomous-driving systems. Delphi Technologies retained engine-oriented technology, including the inverters needed to run battery-electric vehicles.
Delphi Technologies merged with BorgWarner in 2020, ending commercial use of the Delphi name though it lives on in litigation brought against the company by pensioners.