On January 28, local time, BorgWarner announced that it has acquired Delphi Technology for a total of 3.3 billion US dollars (about 22.89 billion yuan). The transaction is expected to be completed in the second half of 2020, at which time the name Delphi will disappear in the long history, and BorgWarner, which has absorbed the Delphi technology product group, is expected to take the next step in the field of power drive.
■ Delphi exits the stage of history
The acquisition will take the form of an all-stock transaction. The stock on hand of the shareholders of Delphi Technology will be converted into BorgWarner's stock at a ratio of 1: 0.4534, which is equivalent to $ 17.39 per share, which is about 77% premium to the closing price of Delphi Technology on the 27th. If the shares are converted into cash, Delphi Technology has an enterprise value of $ 3.3 billion.
After the transaction is completed, the original BorgWarner shareholders will account for 84% of the combined group's equity, while the existing shareholders of Delphi Technology will own approximately 16% of the shares.
This acquisition has caught some in the industry by surprise, but considering Delphi's recent development and transformation, the acquisition was not too surprising. As a former hegemon in the auto parts industry, this independent component manufacturer, which had been independent from General Motors of the United States, once overwhelmed Bosch, Continental and other manufacturers. In 2004, Delphi had revenues of 28.7 billion U.S. dollars.
However, since giving up the hegemonic position to Bosch ($ 32.9 billion) in 2005, Delphi has gone downhill, continuously stripping assets and reorganizing its business. In 2008, the interior and door lock divisions were separated into Entanhua. (Inteva) sold the chassis and suspension business to Jingxi Heavy Industry in 2009, sold the exhaust control system to Ke Kang, and sold the air-conditioning business to Mahler in 2015.
In May 2017, Delphi announced the split. The parent company was officially renamed Apollo and holds most of the original business and assets of the original group. In the future, it will focus on the intelligent networking and autonomous driving businesses. The powertrain business unit was split and named Delphi Technology, focusing on internal combustion engines, software control and electrification. In 2018, Apollo's and Delphi's revenues were US $ 14.4 billion and US $ 4.86 billion, respectively. According to the numbers, it can be seen that this split is not equal. It is the company's future continuity and hope that it will be separated Delphi Technology is more like an abandoned part.
At a time when the outlook of the traditional internal combustion engine industry is not optimistic, and the global automotive industry is facing a cold winter, Delphi Technology agrees to be acquired, which is also a rational choice to a certain extent. In view of the fact that after the split, Apollo is already an independent entity, the acquisition of Delphi Technology will not affect Apollo.
BorgWarner is expected to rank among the top 20
For BorgWarner, the acquisition of Delphi Technology is also a good deal. Financially, in 2019, BorgWarner and Delphi Technology had revenues of $ 10.17 billion and $ 4.36 billion, totaling $ 14.5 billion. Among them, 75% comes from passenger cars, 16% comes from commercial vehicles, and after-sales business accounts for 9%. After the merger of the two parties, the new group's global business will be more balanced, with 39% in Europe, 32% in North America, and 27% in Asia Pacific.
According to the 2019 China Automotive News list of top 100 global auto parts companies, BorgWarner and Delphi Technology ranked 27th and 68th respectively. After the merger, the new company is expected to enter the top 20.
In addition, business integration can bring synergies and reduce costs. BorgWarner predicts that by 2023, the combined company will achieve approximately $ 125 million in synergies at two levels: sales, management and administrative costs (SG & A) and procurement costs.
Of course, BorgWarner's operating profit may be diluted by Delphi in the short term. In 2019, BorgWarner ’s adjusted profit margin was 12.1%, Delphi Technology ’s 7.2%, and BorgWarner ’s profit margin after the consolidated statement will be 10%. Considering the synergies brought by Delphi ’s products, the actual adjusted profit margin It will be 11%.
■ Highly complementary product groups
The acquisition of Delphi Technology is in line with BorgWarner's consistent strategic line. On the one hand, BorgWarner is trying to get rid of its dependence on traditional internal combustion engine technology and turn to electrification; on the other hand, BorgWarner also believes that the electrification transformation is not a one-day effort and does not give up the value and potential of internal combustion engine-related products in the short term. Dig. Therefore, BorgWarner executives have always insisted that the three major product groups of internal combustion engines, hybrids and electric drives work simultaneously, and gradually realize the electrification transformation through acquisitions and research and development.
BorgWarner values Delphi's product portfolio and technology. BorgWarner CEO Frederic Lissard said: "This acquisition fully reflects our power system development strategy. While greatly improving our competitive advantage in the field of electric drives, it also strengthens our role in the traditional fuel power market. penetration."
The product group of Delphi Technology is mainly divided into two parts. The first is traditional fuel power systems, including engine fuel injection systems, transmission controllers, and electronically controlled ECUs. These products are complementary to BorgWarner's turbochargers and exhaust management devices. The second is electric drive systems, such as high-voltage inverters, battery management systems, integrated drive modules, etc. These coincide with BorgWarner's electronic drive axles, P2 hybrid power modules, and "three-in-one" electric drive systems.
Therefore, for BorgWarner, the acquisition has two major benefits. The first is to strengthen BorgWarner's power electronics portfolio. The combined company can provide customers with standalone or integrated power electronics products (including high-voltage inverters, converters, car chargers, and battery management systems) and solutions (including software, system integration, and thermal management). The second is to strengthen BorgWarner's internal combustion engine, commercial vehicle and aftermarket business. Delphi's broad range of internal combustion engine products is an effective complement to BorgWarner, which can improve the fuel efficiency and performance of automobiles. The addition of Delphi's commercial vehicle and aftermarket businesses will allow BorgWarner to better balance its light vehicle, commercial vehicle and aftermarket businesses.
■ The direction of electrification is not changed
BorgWarner predicts that by 2023, its three main business segments: internal combustion engines, hybrids and electric drives will account for 64%, 30% and 6% of the revenue in the light vehicle market, respectively. Delphi Technologies has 59%, 29% and 12% respectively. After the merger, the figures for the new company are 63%, 29%, and 8%. In other words, the combined company's internal combustion engine business will have a lower proportion.
In recent years, BorgWarner has made in-depth layouts in batteries, motors and electronic controls. The determination of electrification transformation is very obvious. This can be seen from the frequent acquisitions. Acquired Remy Motors in 2015 to obtain advanced motor technology; acquired Sevcon in 2017 to strengthen its capabilities in the power electronics field; acquired and integrated Reinhardt Drive Systems and AM Racing in early 2019 to provide pure electric and hybrid Dynamic drive solutions; May 2019 and ROMEO established a joint venture to develop power battery packs and battery management systems. In January 2020, it acquired Delphi Technology and obtained advanced technologies in power electronics and software control.
After the merger, Delphi Technology's existing 21,000 employees will join BorgWarner. "We respect Delphi's teams around the world and welcome them to BorgWarner. We believe that we will be able to speed up the pace together and respond to the market trend of electrification." Lisard said.