ZF Friedrichshafen, a German auto-parts giant, has just agreed to shell out $11.7 billion for TRW Automotive (TRW), it’s Michigan-based rival. The offer represents a 16 percent premium over TRW’s recent market value, and yet for ZF it is still a safety play—literally.
TRW specializes in all things accident-related, cranking out a steady stream of seat-belts, airbags, and tire-pressure monitors. It has been at the forefront of so-called active-safety: systems that keep cars from drifting out of lanes and compensate for drivers who are be slow on the brake. This is the bridge between old-fashioned, human driving and fully-automated robot cars. It’s also the most immediate growth opportunity in the auto-parts business, which is why ZF is willing to part with almost $12 billion in cash.
ZF certainly is no slouch. It has almost 73,000 employees and booked about $23 billion in sales last year. But it specializes in transmissions, suspensions, clutches and steering machinery. Its portfolio of safety-tech, by comparison, is fairly light.
“Customers of both companies will have access to a unique offering under one roof,” ZF Chief Executive Stefan Sommer said in the statement. It’s a bit of merger spin. Sure, ZF will be more of a one-stop shop for companies like Volkswagen (TRW’s top customer), but it will also have much more clout at the negotiating table. With $41 billion in combined sales, the two companies would become the No. 2 auto-parts supplier, according to Automotive News.
TRW, in particular, is tuned up at the moment after slumping through the recession. Between 208 and 2013, its sales surged 16 percent to $17.4 billion and it shifted from a $779 million loss to a $970 profit.
