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BorgWarner (BWA) Boosts Electrification Portfolio on AKASOL Takeover

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  • BWA

BorgWarner Inc. BWA recently announced the completion of the tender offer for shares of AKASOL AG, making the company the owner of 89.08% of AKASOL’s outstanding shares.

BorgWarner has paid roughly 648 million euros to settle the arrangement, with the purchase price being 120 euro per tendered AKASOL share. The transaction will be funded primarily from BorgWarner’s existing cash balances, including proceeds received from its previously-announced public offering of 1.00% Senior Notes due 2031.

It is projected that AKASOL will be integrated into BorgWarner’s Air Management reporting segment. The financial impact of the acquisition will be calculated, when the company reports second-quarter earnings on Aug 4. AKASOL will operate independently from its headquarters in Darmstadt, Germany.

AKASOL is the leading developer and manufacturer of high-performance lithium-ion battery systems for buses, commercial vehicles, rail vehicles, industrial vehicles, ships and boats. It is a pioneer in providing a low-cost, flexible battery technology solution to world-class customers for commercial vehicles, as well as off-highway applications. The company has a technology-independent product portfolio, enabling it to develop the best battery cells customizable according to the clients' individual needs. With three facilities located across Germany and one facility in the United States, AKASOL is well positioned to capture a niche market across Europe and North America.

Rationale Behind the Takeover

Nearly four months ago, BorgWarner and AKASOL had signed a binding Business Combination Agreement, under which BorgWarner laid out a voluntary public take-over offer for all outstanding shares of AKASOL. The completion of the take-over marks a significant milestone for both companies. The acquisition, in fact, makes AKASOL a majority-owned subsidiary of BorgWarner.

AKASOL welcomes the acquisition by BorgWarner, as this offers an excellent strategic perspective for the company. Both companies share the vision of zero-emission mobility and together, they can further fortify AKASOL’s technology and market leadership in advanced battery systems, thus delivering innovative, environmentally-friendly solutions to global customers.

BorgWarner is also highly ecstatic about the take-over of the leading battery systems provider. With the global, lithium-ion battery market for electric vehicles likely to expand, AKASOL stands tall to cater to the surging demand for battery systems in the electric commercial vehicle market. The acquisition, thus, further enhances BorgWarner’s commercial vehicle and industrial electrification portfolio, enabling the company to capitalize on the evolving battery pack market.

BorgWarner is optimistic to add AKASOL’s state-of-the-art product portfolio and expertise to its existing line-up, as the company plans to boost its electric vehicles’ (EVs) revenues to around 45% of the total revenues by 2030 under Project Charging Forward.

The acquisition complements BorgWarner’s existing product offerings across its full suite of electrification capabilities, providing the company an opportunity for long-term profitable growth.

Michigan-based BorgWarner is a global leader in manufacturing turbochargers for gasoline-powered vehicles. Its products include four-wheel-drive and all-wheel-drive transfer cases, as well as automatic transmission and timing chain systems.

As the global auto industry evolves to meet the increasingly stringent emission regulations, BorgWarner, which has Volkswagen AG VWAGY and Ford F as its largest customers, is likely to benefit from the accelerating vehicle electrification. Also, in its bid to take advantage of the trending electric vehicle (EV) race, BorgWarner plans to move away from a balanced propulsion strategy and accelerate its shift toward electrification by supplying clean and efficient technology solutions required for hybrid and EVs.

BorgWarner, closest peer of which is Allison Transmission ALSN, currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, shares of the company have appreciated 45.1% in the past year compared with the industry’s rally of 18.4%.

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