BorgWarner Inc. and Delphi Technologies PLC announced that they have entered into a definitive transaction agreement under which BorgWarner will acquire Delphi Technologies in an all-stock transaction that values Delphi Technologies’ enterprise value at approximately $3.3 billion.
Following the closing of the transaction, the combined company will be led by Frédéric Lissalde, BorgWarner’s president and CEO, and Kevin Nowlan, BorgWarner’s CFO, and will operate as BorgWarner. The combined company will be headquartered in Auburn Hills, Mich.
BorgWarner said the acquisition will strengthen its power electronics products, capabilities and scale, adding that combining with Delphi Technologies is consistent with its evolution towards the propulsion market of the future and would enable BorgWarner to maintain flexibility across combustion, hybrid, and electric propulsion.
The agreement, which has been approved by the boards of directors of both companies, will result in current BorgWarner stockholders to own approximately 84% of the combined company, while current Delphi Technologies stockholders are expected to own approximately 16%.
In fiscal year 2019, BorgWarner and Delphi Technologies estimate that they generated $10.17 billion and $4.36 billion of net sales, respectively. Following the close of the transaction, BorgWarner said the combined company is expected to be a pure-play global propulsion entity.
“This exciting transaction represents the next step in BorgWarner’s balanced propulsion strategy, strengthening our position in electrified propulsion as well as our combustion, commercial vehicle and aftermarket businesses,” said Frédéric Lissalde, president and CEO of BorgWarner. “Delphi Technologies will bring proven leading power electronics technologies, talent and scale that will complement our hybrid and electric vehicle propulsion offerings. As a combined company, we look forward to delivering enhanced solutions to our customers while driving increased value for our stockholders. We are confident that together we will be able to move faster to address market trends toward electrification.”
The combined company would offer customers a suite of integrated and standalone offerings of power electronics products, including high voltage inverters, converters, on-board chargers and battery management systems and capabilities including software, systems integration and thermal management, BorgWarner said.
It is also expected to further enhance BorgWarner’s combustion, commercial vehicle and aftermarket businesses. Delphi Technologies’ breadth of combustion propulsion products complements BorgWarner’s portfolio, which is focused on clean technologies to increase efficiency and performance of modern combustion vehicles. Adding Delphi Technologies’ commercial vehicle and aftermarket business results in more balance across light vehicles, commercial vehicles and the aftermarket.
BorgWarner expects the combined company to realize runrate cost synergies of approximately $125 million by 2023 driven primarily by SG&A and procurement savings. In addition, BorgWarner expects significant long-term revenue synergies primarily from the opportunity to offer more integrated electrified products, creating further value.
The transaction is expected to close in the second half of 2020, subject to approval by Delphi Technologies’ stockholders, the satisfaction of customary closing conditions and receipt of regulatory approvals.