ZF Talks to Buy TRW Said to Hinge on Exiting Bosch JV

ZF Friedrichshafen AG’s ambitions to become the world’s no. 2 automotive supplier are being held up by negotiations to exit a joint venture with Robert Bosch GmbH, the biggest car-parts maker, according to people familiar with the matter.

ZF is trying to reach an agreement with Bosch on the sale of its stake in their 50-50 steering-systems joint venture before it can complete a deal to acquire TRW Automotive Holdings Corp. of the U.S., said the people, who asked not to be identified because talks are private. Unraveling the partnership, which was formed in 1999 and has about $5.5 billion in annual revenue, is complex and many of the key parties are away for summer holidays, they said.

The German company aims to reach a deal with TRW in the first half of September, the people said. TRW fell 2 percent to $97.57 a share in New York trading yesterday, giving it a market value of $10.9 billion.

The companies have held talks on a sale at a price of about $105 to $110 per share, though the amount is still being negotiated, the people said. Last month, ZF and its advisers at Citigroup Inc. and other banks had been exploring a proposal that values TRW at between $110 to $112.50 a share, two people said in July.

Added Complexity

ZF confirmed in July that it’s in negotiations to buy TRW, which would create the world’s second-largest auto-parts supplier by sales -- combining a maker of transmissions with a leading producer of car-safety technology. Negotiations were initially expected to take three to four weeks and wrap in mid-August, people said last month. Delays to the process now mean that timetable is unlikely to be met.

The Bosch joint venture has added complexity to the deal because of a contractual clause that bans whoever ends the tie-up from competing in the steering-systems business for a defined time period, one of the people said. If ZF can’t raise enough money from the sale of its stake to help finance the TRW acquisition, it’s possible the deal could fall apart, the person said. The German company’s supervisory board has told Chief Executive Officer Stefan Sommer his position is safe even if a deal isn’t reached, another person said.

Representatives for ZF, TRW and Bosch declined to comment.

ZF is looking to add TRW technology -- from air bags to collision sensors -- to its existing suite of mechanical parts, as consumer demand and government regulation spread the adoption of features to prevent accidents and protect passengers and pedestrians.

Safety Technology

Livonia, Michigan-based TRW, which derived most of its sales last year from safety-related products, said in April it projects the market for driver-assistance technology will grow more than five-fold through 2020. A combination would create a company with almost $40 billion in annual sales, vaulting ZF to the No 2. spot among world’s largest auto-parts suppliers, just behind Stuttgart-based Bosch, rankings compiled by Automotive News show.

Based in Friedrichshafen, Germany, ZF makes steering systems, clutches and axles, and transmissions, including the fuel-efficient, nine-speeds Fiat SpA uses in its Jeep Cherokee SUVs and Chrysler 200 sedans. Reuters reported earlier this month that the company was considering selling its stake in the steering business to resolve expected antitrust issues.

Its primary shareholder is the Zeppelin Foundation, started by airship pioneer Ferdinand von Zeppelin in 1908.

Before it's here, it's on the Bloomberg Terminal.