In the largest acquisition in the history of auto suppliers, Siemens AG said today it will sell its Siemens VDO Automotive parts unit to German rival Continental AG for $15.66 billion, or 11.4 billion euros.
The decision ends long-discussed plans for a stock sale of the VDO unit.
Continental said it will pay cash for Siemens VDO, raised by taking on new debt. Continental's offer is higher than Siemens VDO's revenue of $13.4 billion in 2006. Both companies expect the deal to close by year end, pending approvals by regulators.
By choosing Continental, the Siemens supervisory board spurned a reported competing offer from TRW Automotive Inc. and its largest shareholder, the Blackstone Group, a private equity firm. TRW and Blackstone today both declined to comment on the deal.
Big win for Wennemer
The deal is a big win for Continental Chairman Manfred Wennemer, who wants to expand the auto parts and tire maker into a big auto supplier to rival Germany's Robert Bosch GmbH. Last year, Continental bought Motorola Inc.'s automotive electronics business.
"This looks like an excellent opportunity for Continental," said Neil De Koker, president of the Original Equipment Suppliers Association in suburban Detroit. "They've been expanding into the electronic and control side of the business rapidly."
Bosch is the world's biggest auto supplier. Continental specializes in chassis controls, brakes, tires and stability control. Siemens VDO's focus is on powertrain controllers, engine and chassis electronics and navigation systems.
As soon as Siemens announced plans in January for the stock sale, Wennemer and his top executives said Continental wanted to buy the unit. But late last month, Wennemer told the Automotive News Europe Congress that Siemens still favored a stock sale for VDO.
At that time, Wennemer said Continental would keep the VDO name if its bid was accepted.
"By joining forces, pooling our innovative prowess and allying our leading positions worldwide in key market segments like safety, chassis, powertrain systems and telematics we are extremely well placed to take on the global competition," Wennemer said today in a statement.
Will be fifth biggest
A combined Continental/Siemens VDO would rank No. 5 on the Automotive News list of top 100 global original equipment suppliers, with combined original equipment sales of $23.48 billion in 2006. Separately, Siemens VDO ranks No. 11 and Continental ranks No. 12.
The combined units would leapfrog over Johnson Controls Inc., Aisin Seiki Co. Ltd., Lear Corp., Faurecia, Valeo SA and TRW on the list. It would rank just behind Denso Corp. and Magna International Inc.
Siemens VDO and Continental have North American divisions based in suburban Detroit. Continental employs more than 800 workers in Michigan. Siemens employs about 830 workers in southeast Michigan.
Brent Snavely, Philip Nussel and Reuters contributed to this report
You may e-mail Dale Jewett at [email protected]