Delphi, a parts supplier which used to be owned by GM a generation ago, went bankrupt, spun off part of its business, and then added the word “Technologies” to its name to (I guess) seem young and hip, is being purchased by BorgWarner, another parts supplier, a somewhat sad denouement for a company that used to be the biggest parts maker in the world.
The deal is all-stock, according to Automotive News, meaning that no cash will actually be changing hands, which is usually the kind of deal you see when the company being purchased is not actually worth all that much in reality.
Delphi shareholders will receive 0.4534 shares of BorgWarner for each share held. That translates to $17.39 per share, a premium of about 77 percent to Delphi’s closing price on Monday.
Upon closing of the transaction, current BorgWarner stockholders are expected to own about 84 percent of the combined company, while current Delphi Technologies stockholders are expected to own about 16 percent.
The deal, which puts Delphi’s enterprise value at approximately $3.3 billion, is expected to close in the second half of the year.
Both companies make parts for internal-combustion engine powered cars, which are broadly in decline as government regulations—particularly in Europe and China—incentivize a shift to electrified powertrains. This potential merger highlights an electric reality that is happening, ready or not, and also would cap over two decades of decline for Delphi, which was the biggest parts maker in the world when it was spun off from GM in 1998.
Since then, Delphi’s decline has been slow-moving but relentless. A little more than two years ago, it spun off a division—renamed Aptiv—that makes electrical system components, in addition to having self-driving car ambitions. That left Delphi with its legacy business, an increasingly shrinking part of the automotive manufacturing landscape, even as it desperately tried to remake itself.
According to Bloomberg, Delphi has a market value of around $844 million, which is down from the $4.5 billion it was worth at the time of the spin-off. BorgWarner is worth a little over $7 billion. It makes and designs transmissions and turbochargers, among other products, for companies like Volkswagen. The fact that it can so easily swallow up Delphi is a reminder of not only how much the industry is changing now but also how much it has changed in just the past couple of decades.