There was a big shakeup in the automotive supplier market late last week, as Germany's ZF, a company well regarded around these parts for its gearboxes, submitted a surprise preliminary offer to purchase Michigan-based TRW Automotive, a supplier of safety systems, suspension components, and so on.
The "preliminary, non-binding proposal," to use the legalese mentioned in a statement by TRW, would create the second-largest automotive supplier on the planet, provided the acquisition is approved by all parties. Currently, ZF is the ninth-largest supplier on the planet, while TRW is eleventh, according to Automotive News (Germany's Bosch is the largest overall). The combined company would have nearly $40 billion in annual sales.
Analysts do seem rather bullish on the whole prospect.
"With what ZF and TRW each bring, they would have all the dynamics you would need under one roof to have a fully automated vehicle," said Richard Hilgert, an analyst with Morningstar, Inc., who spoke to Bloomberg.
TRW was originally spun off as an independent company back in 2004, following a 2002 purchase by the Blackstone Group from defense contractor Northrop Grumman, then valued at $4.7 billion. Since that time, TRW has tripled in value, and its shares have been trading at record highs, with estimates of its value sitting around $11 billion based on a closing share price on Friday of $101.47 – a 2.6-percent jump in one-day trading. It saw $17.4 billion in annual sales last year.
As for the actual cost of the deal, an anonymous banker not involved in the deal spoke to Automotive News, hypothesized that ZF could be able to secure up to 10 billion euros ($13.6 billion) to finance the purchase.
Expect to hear more about this one in the coming weeks and months.