TRW attracts takeover offer from ZF Friedrichshafen, report says

If completed, acquisition would create world's No. 2 auto supplier

UPDATED: 7/10/14 4:15 pm ET - adds details, stock close

NEW YORK (Bloomberg) -- TRW Automotive Holdings Corp., the world’s biggest car-safety equipment supplier, has received a preliminary takeover offer from Germany’s ZF Friedrichshafen AG, people with knowledge of the matter told Bloomberg.

TRW confirmed it is evaluating a "preliminary, non-binding proposal" to acquire the company, but a TRW statement didn't name the suitor or disclose further details.

If completed, the deal would create the world's second-largest auto supplier in terms of revenue and it would be the largest supplier takeover in seven years. 

TRW has allowed ZF to conduct some due diligence, one of the people said, asking not to be identified discussing a private matter. While no specific price has been discussed, closely held ZF values TRW at around $11 billion to $12 billion, this person said.

"The company has not made a decision to pursue any specific strategic transaction or any other strategic alternative, and there is no set timetable for the strategic review process," the TRW statement said. "There can be no assurance that the process described above will result in the consummation of any transaction or any changes to the company's current business plan."

TRW said it is under no obligation to provide further updates on the talks. 

Negotiations are at an early stage and may not lead to a deal, the sources told Bloomberg. Any agreement could be more than a month away, one of the people said. TRW shares rose 8 percent to close at $98.91 -- an all-time record -- in New York today. At that price TRW has a market value of about $11 billion.

The two companies generated a combined $36.5 billion in business with automakers last year and together would have ranked behind Robert Bosch as the world's second-largest auto supplier, based on Automotive News data.

This would be ZF’s biggest acquisition ever and allow it to compete globally with other major suppliers, such as Continental AG, with products that use radars and cameras to prevent crashes by alerting a driver of a potential collision.

“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, a Chicago-based analyst with Morningstar Inc.

TRW, whose biggest customer is Volkswagen AG, has rebounded from the U.S. recession along with the rest of the auto industry, reporting annual sales of $17.4 billion last year compared with $11.6 billion in 2009.

Airship pioneer

Consumer demand and government regulation are spreading the adoption of features to prevent accidents and protect passengers and pedestrians. TRW, which derived most of its sales last year from safety-related products including airbags and seat belts, said in April it projects the market for driver-assistance technology will grow more than five-fold through 2020.

ZF posted sales last year of 16.8 billion euros ($22.9 billion), with more than half of that from Western Europe, its annual report shows. Based in Friedrichshafen, Germany, ZF makes steering systems, clutches and axles, and transmissions, including the fuel-efficient, nine-speeds Fiat Chrysler uses in its Jeep Cherokee SUVs and Chrysler 200 sedans.

Its primary shareholder is the Zeppelin Foundation, started by airship pioneer Ferdinand von Zeppelin in 1908.

John Wilkerson, a spokesman for TRW at its suburban Detroit headquarters, declined to comment. ZF won’t comment further on a possible acquisition until the talks have concluded, Martin Demel, a spokesman, said in the e-mailed statement.

Global sales

TRW generates about 29 percent of its annual revenue from the U.S., with another 16 percent coming from China and 13 percent from Germany.

June was the auto industry’s best month in the U.S. since July 2006, with the seasonally-adjusted rate of sales in the country jumping to 17 million, according to the Automotive News data center.

The purchase would be the largest auto-parts takeover since Continental, the German maker of brakes and shock absorbers, acquired Siemens AG’s VDO Automotive unit in 2007 for about 11.4 billion euros ($15.5 billion at current exchange rates), data compiled by Bloomberg show.

Defense contractor Northrop Grumman Corp. sold TRW to Blackstone Group LP for about $4.7 billion in a deal announced in late 2002. TRW went public in February 2004 and has more than tripled in value since then, data compiled by Bloomberg show.

ZF ranks No. 9 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $20.4 billion during its 2013 fiscal year. TRW ranks No. 11 on that list with worldwide sales to automakers of $16.1 billion in 2013. 

Automotive News staff contributed to this report.

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