Borgwarner To Purchase Electrical Motor Maker Remy For $950M

BorgWarner agreed to purchase Remy for $951 i M one thousand inwards cash, driving farther consolidation of the auto-parts industry.

BorgWarner volition pay $29.50 a share, a 44 percentage premium from Remy’s closing cost on Friday, according to a contention today. The cost indicates an firm value of well-nigh $1.2 billion, BorgWarner said. The maker of turbochargers in addition to transmission parts said the bargain is prepare to unopen inwards the 4th quarter in addition to should add together to earnings inwards the starting fourth dimension twelvemonth because of purchasing efficiencies in addition to other savings.

Demand for fuel-saving applied scientific discipline in addition to global scale is pushing auto-parts makers to consolidate. In May, TRW Automotive Holdings Corp. was acquired yesteryear High German car supplier ZF Friedrichshafen AG for $12.4 billion.

“Our primary focus has been organic growth, in addition to that remains a prime number path for us,” James Verrier, CEO of BorgWarner, said on a conference call. “But we’ve too been consistent well-nigh the need for M&A to add together fundamental applied scientific discipline to sustain that growth.”

The acquisition highlights the increasing importance of the electrification of the powertrain, which has non been a forcefulness of BorgWarner’s, Verrier said.

BorgWarner rose 1 percentage to $54.14 at 11:39 a.m. inwards New York, every bit Remy soared 42 percentage to $29.18. This twelvemonth through Friday, Remy had fallen 1.9 percentage in addition to BorgWarner had declined 2.4 percent.

Electric Powertrains

Buying Remy volition add together alternators, starters in addition to hybrid motors, giving BorgWarner the mightiness to exercise goodness every bit to a greater extent than powertrains blend electrical mightiness amongst traditional gasoline-fueled technology.

Some investors had been concerned that the deed to hybrid engines would eventually movement BorgWarner to lose sales to automakers, Joseph Spak, an analyst amongst RBC Capital Markets, wrote inwards a query annotation today.

BorgWarner CFO Ron Hundzinski said he expects savings from the acquisition of at to the lowest degree $15 i M one thousand annually inside 2 years, inwards role yesteryear eliminating duplicate costs associated amongst a world company, in addition to from lower purchasing expenses. He said he expects the Remy line of piece of occupation organization to accept turn a profit margins inwards the mid-teens, like to BorgWarner’s.

Former GM unit

Remy International, formerly known every bit Delco Remy, traces its roots to brothers Frank in addition to Perry Remy, who developed magnetos, generators that used magnets to aid start early on automobiles. GM acquired Delco Remy inwards 1918 in addition to spun it off inwards 1995. The cite was changed to Remy International inwards 2004 in addition to the Pendleton, Ind.-based fellowship spent less than 2 months inwards bankruptcy inwards 2007.

Remy posted cyberspace income from continuing operations of $6.1 i M one thousand final twelvemonth on revenue of $1.2 billion. In 2013, it posted cyberspace income of $12.4 i M one thousand on revenue of $1.1 billion.

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