REFILE-ZF explores steering unit sale as part of TRW deal -sources

Mon Aug 4, 2014 1:54pm EDT

(Fixes formatting glitch in second paragraph)

By Soyoung Kim and Edward Taylor

NEW YORK/FRANKFURT Aug 4 (Reuters) - German auto parts maker ZF Friedrichshafen AG is considering selling its steering business as part of its proposed acquisition of U.S.-based TRW Automotive Holdings Corp, to resolve expected antitrust issues, people familiar with the matter said on Monday.

ZF makes steering systems through ZF Lenksysteme GmbH, its joint venture with Robert Bosch GmbH. ZF has discussed exiting the joint venture by selling its interest to the bigger German rival, the people said.

The joint venture, whose ownership is split equally between the two companies, had annual revenue of 4.11 billion euros ($5.5 billion) in 2013, according to company filings.

TRW's steering business, meanwhile, posted revenue of $2.7 billion for 2013, or 15.5 percent of group sales. It has cited strong demand for its electric power-steering systems as a driver of future growth.

ZF is hoping to have a divestiture plan in place before it strikes a deal to buy TRW, one of the main remaining issues to resolve as merger talks have reached an advanced stage, the people said, asking not to be named because the matter is not public.

Representatives for ZF, TRW and Bosch declined to comment.

ZF is in advanced discussions to buy TRW for nearly $12 billion to create an automotive supply power house focused on powertrain and car safety components, Reuters reported last week.

If completed, the merger would create one of the world's largest automotive suppliers with combined annual revenue exceeding $40 billion. ZF, a major provider of steering systems and powertrains, would get a leading maker of automotive safety products, such as brakes and air bags.

ZF, which is lining up roughly 10 billion euros in debt financing, is in talks to pay around $105 per TRW share, Reuters reported, just above its current stock price and valuing the company at close to $12 billion based on shares outstanding.

Discussions are continuing and the two sides have yet to negotiate a final price and other terms, people familiar with the matter said. They added the companies hoped to reach an agreement in a matter of weeks but there was no guarantee one would be struck within that timeframe.

Shares of TRW were trading at around $102 on the New York Stock Exchange on Monday, near all-time highs after surging on expectations of a takeover in recent weeks.

ZF and Bosch established their steering joint venture in 1999. The venture has 18 locations worldwide in eight countries with more than 13,000 employees, according to its website.

TRW, based in Livonia, Michigan, makes airbags, electronics, and braking and steering equipment for cars globally. It sells to nearly all major automakers, including Ford Motor Co and General Motors Co.

The company, which had sales of $17.43 billion last year, counts Volkswagen AG as its largest customer and gets about 40 percent of its revenue from Europe.

Privately owned ZF Friedrichshafen, which supplies chassis components to companies including Audi AG and BMW , generates about half of its revenue in Europe and posted 2013 revenue of 16.84 billion euros ($22.6 billion). (Additional reporting by Andreas Cremer and Ilona Wissenbach in Frankfurt, Laurence Frost in Paris; Editing by David Gregorio)

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