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As automotive parts manufacturers from around the world assemble for the opening of Automechanika in Frankfurt, unlisted German company ZF and U.S.-based TRW (NYSE:TRW) have announced that the former will acquire the latter for $13.5 billion in cash or $105.60 per share. TRW’s share price is currently 103.01, down less than a percentage point from Friday’s close of 103.85.
The news should send tremors throughout Automechanika and the entire automotive parts manufacturing world, as the acquisition would create the second-largest company of its kind behind only Bosch GmbH. In fact, the shock waves have already set off some alarms.
The New York firm of Levi & Korinsky LLP has announced that it is investigating the TRW Board of Directors for potential breach of fiduciary responsibility “and other violations of state law.” The basis for the investigation is that the TRW board failed to shop the company to establish a value scenario. Levi & Korinsky allege that ZF is underpaying TRW shareholders based at least in part on a share price target of $120.00 set recently by one analyst.
The offer would have seem a bit more attractive a month ago when, on 15 August, TRW’s share price was at 98.29, or on 25 August when it was at 94.80. But it has been above 100 for five days, making acceptance of the slim offer somewhat suspect. Over 13.5 million shares have been traded today in what could easily be called an extraordinary trading day for TRW.
ZF had €16.8 billion ($21.75 billion USD) in sales in 2013. It has 122 production companies under its umbrella, employing over 72,000 employees. TRW had $17.4 billion (€13.44 billion) in sales in 2013. TRW began 2014 at 73.64, but jumped to 79.81 on 14 February when the full financials for 2013 were released.
So, whether or not ZF and TRW will be combined to become the number two automotive parts manufacturer in the world remains to be see. Given the miniscule value being offered to shareholders, it is likely that Levi & Korinsky may not be the only ones objecting to a deal that was projected to happen yesterday and agreed upon today.
