Shares of auto parts manufacturer Wabco Holdings (NYSE: WBC) fell nearly 10% on Thursday morning after German automotive giant ZF Friedrichshafen announced a deal to buy Wabco for $7 billion. The offer price is well above where Wabco was trading in late February before word of a potential deal became public but falls short of the highs the shares hit as investor enthusiasm about a potential buyout grew.
ZF Friedrichshafen has agreed to pay $136.50 per share in cash for Wabco, a premium of 13% to Wabco's closing price on Feb. 26, the day before Wabco said it had been approached by ZF. The German company has been a consolidator in the auto parts sector, buying TRW Automotive in 2014 and attempting to acquire Wabco in 2017.
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Wabco is a braking specialist focused on advanced driver-assistance systems for trucks and trailers and offers ZF Friedrichshafen greater exposure to a range of autonomous-driving technologies. The companies already work together on an evasive-maneuver system that combines Wabco braking technology with ZF Friedrichshafen's active-steering software.
As the stock reaction suggests, the buyout is bittersweet for Wabco shareholders. The company prior to the deal talk had shed about a quarter of its value amid fears that the global commercial vehicle cycle had peaked. But the $136.50-per-share price is below where the shares traded in January 2018, well before the buyout talk surfaced.
Shareholders might be disappointed, but Wabco chairman and CEO Jacques Esculier, in a statement announcing the transaction, called it "the right combination at the right price at the right time."
Investors could try to push the company to negotiate a higher price or find another buyer, but they face an uphill battle given Wabco's recent weakness and the fact that there is no obvious better fit to buy this company. In all likelihood, ZF Friedrichshafen will finally succeed in acquiring Wabco.
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