German automobile and commercial vehicle technology supplier ZF Friedrichshafen plans to acquire rival Wabco for $7 billion, the companies announced Thursday.
The acquisition of Wabco will allow ZF, a leading supplier in the area of steering and driveline technology, to expand its global reach in the autonomous commercial vehicle and passenger car market.
“This will create the foundation for ZF to offer comprehensive systems for safe and automated mobility solutions for passengers and goods to our customers,” said Wolf-Henning Scheider, chief executive of ZF.
Wabco specializes in developing autonomous driving technologies, including automatic braking, for the commercial vehicle market.
“We have a long history of successful collaboration to develop innovative technologies with ZF with both companies sharing an uncompromising drive for excellence, passion for innovation and exceptional customer focus,” said Jacques Esculier, chairman and chief executive of Wabco.
The merger, which has been unanimously approved by Wabco’s board of directors, is contingent on ZF convincing more than 50 percent of Wabco’s shareholders to tender their shares.
The terms of the all-cash deal may face pushback from Wabco shareholders, analysts at Stifel Financial Corp. said Thursday. The deal calls for ZF to pay Wabco $136.50 per share. This is lower than Wall Street’s expectations and falls short of Stifel’s target price of $147 per share.
Wabco’s shares fell 10.4 percent in pre-market trading Thursday, but are still about 13 percent higher than when takeover rumors were announced in late February. A competing bid from another buyer is unlikely, Stifel said.
The deal is expected to close early next year.
“For ZF, the acquisition of a specialist and leader in commercial vehicle braking systems means adding a stable and growing business segment and enables our existing commercial vehicle division to expand its expertise in vehicle dynamics control,” Scheider said.
The combined company will have annual sales of around $40 billion.