(Adds company background, financial details)
By Soyoung Kim, Arno Schuetze and Edward Taylor
NEW YORK/FRANKFURT, July 30 Germany's ZF
Friedrichshafen AG is in advanced talks to acquire U.S.-based
TRW Automotive Holdings Corp for nearly $12 billion, in
a deal that would create an automotive supply powerhouse,
according to people familiar with the matter.
ZF, which is lining up roughly 10 billion euros
($13.4 billion) in debt financing, is in talks to pay around
$105 per TRW share, the people said, just above its current
stock price and valuing the company at close to $12 billion
based on shares outstanding.
A deal at that price level would represent a multiple of
about 7.5 times TRW's estimated earnings before interest, tax,
depreciation and amortization in 2014, making it one of the most
expensive takeovers in the auto parts sector, the people said on
Shares of TRW, which have been trading near all-time highs
after surging on expectations of a takeover in recent weeks,
fell 2 percent to $102.50 on Wednesday. The stock traded as low
as $1.38 at the height of the U.S. auto industry crisis in 2009.
Discussions are continuing and the two sides have yet to
negotiate a final price and other terms, the people said. The
companies are hoping to reach an agreement in a matter of weeks
but there is no guarantee one will be struck, the people added.
All the people asked not to be named because the discussions
are private. Representatives for ZF and TRW declined to comment.
Citigroup and Deutsche Bank are advising ZF
and providing a bridge loan facility to back the proposed
acquisition, according to the people familiar with the matter.
The banks declined to comment.
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.
TRW said on July 10 that it has hired Goldman Sachs Group
after receiving a preliminary takeover approach. ZF later
confirmed it was in early-stage buyout discussions.
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).
The proposed combination would likely face regulatory
scrutiny and is expected to require some divestitures in areas
such as steering components, according to one of the people
familiar with the matter.
(Reporting by Soyoung Kim in New York, Arno Schuetze and Edward
Taylor in Frankfurt; Editing by Tom Brown and Andrew Hay)