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WABCO (WBC) to Merge With ZF Friedrichshafen by 2020 Start

Zacks Equity Research

WABCO Holdings, Inc. WBC recently entered into a merger agreement with ZF Friedrichshafen AG (“ZF”), a privately held provider of driveline and chassis technology. Per the agreement, ZF will acquire WABCO’s outstanding shares in an all-cash transaction for an equity value of more than $7 billion. ZF will pay $136.50 a share, which is a 13% premium to the closing stock price of $120.75 as on Feb 26.

WABCO’s commercial vehicle safety and technologies for vehicle dynamics control and active air suspension systems will add to ZF’s driveline and chassis technologies that will offer innovative vehicle products. The merger will form an integrated global provider of integrated mobility systems for the automotive and commercial vehicle industry. The combined entity is projected to generate sales of approximately €40 billion.

Of late, new entrants are venturing into the auto industry with an array of unprecedented technologies that are future-oriented and involve huge investments. In order to counter competition and provide customers with enhanced and innovative technology, the industry players are forming alliances and acquisitions apart from investing in research and development. The announced WABCO and ZF merger will help the combined entity take critical decisions required to develop technologies for new domains in future.

Wabco Holdings Inc. Price and Consensus


Wabco Holdings Inc. Price and Consensus | Wabco Holdings Inc. Quote

Further, the merged company will expand global presence apart from reducing the risk on investments required for transforming technologies across domains.

Subject to customary closing conditions, the merger is expected to close by the beginning of 2020. The merger agreement has been approved by the board of ZF and WABCO.

Brussels, Belgium-headquartered WABCO has been gaining business contracts from existing customers and from new ones. New contracts will drive the company’s revenues. Further, WABCO has been expanding its presence through acquisitions. Last year, the company’s revenues rose 14% overall, with 13% coming in from acquisitions.

Shares of WABCO have outperformed the industry it belongs to in the past six months. Over the time frame, the company has gained 12.1%, while the industry lost 15.7%.

Zacks Rank & Stocks to Consider

WABCO currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are Fox Factory Holdings Corporation FOXF, Oshkosh Corporation OSK and General Motors Company GM, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 15.1%. Over the past six months, shares of the company have gained 4.6%.

Oshkosh has an expected long-term growth rate of 11.3%. The stock has gained 5.7% in the past six months.

General Motors has an expected long-term growth rate of 8.9%. Shares of the company have gained 8.5% in the past six months.

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