Germany's ZF Friedrichshafen said it was in early-stage buyout talks with U.S. auto parts supplier TRW Automotive Holdings Corp.
TRW confirmed that it had received a takeover approach, but did not name the suitor.
The companies did not disclose any financial details of the deal, but a Bloomberg report said ZF valued TRW at $11 billion to $12 billion.(bloom.bg/U5p7CG)
ZF's valuation for the $10-billion U.S. supplier is low, an analyst from Tigress Financial Partners said, adding that Magna International Inc could come up with a counter offer.
"We feel the company is worth a lot more and would be a strategic acquisition to a number of other component manufacturers," Ivan Feinseth from Tigress Financial said.
Feinseth values TRW at between $120 and $135 per share. At the higher end of this range, the company is valued at nearly $15 billion, based on 110.76 million shares outstanding.
TRW shares rose as much as 11 percent to a life high of $101.75 in early afternoon trading on the New York Stock Exchange, giving the company a market cap of about $11 billion.
TRW, which had sales of $17.43 billion last year, said it had hired Goldman Sachs & Co as financial adviser.
The Livonia, Michigan-based company makes airbags, electronics, and braking and steering equipment for cars globally, and sells to nearly all major automakers, including Ford Motor Co and General Motors Co.
The company, which counts Volkswagen AG as its largest customer, gets about 40 percent of its revenue from Europe.
Privately owned ZF Friedrichshafen, which supplies chassis components to Audi AG and BMW, gets about half of its revenue from Europe.
The company had revenue of 16.84 billion euros ($22.92 billion) in 2013.
TRW's shares have risen nearly 34 percent since the start of the year up to Thursday's close.
($1 = 0.7345 euros)
(Additional reporting by Rohit T.K. and Sweta Singh in Bangalore; Editing by Ted Kerr and Simon Jennings)