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WABCO to Sell Sheppard to Knorr-Bremse's Bendix for $149.5M

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WABCO Holdings Inc. recently announced that it has entered into a definitive agreement to divest the R.H. Sheppard Co. business to Bendix Commercial Vehicle Systems for $149.5 million.

While Sheppard is a leading supplier of steering technologies for commercial vehicles, Bendix is an indirect subsidiary of Knorr-Bremse — a leading global supplier of braking systems, and other safety-critical rail and commercial vehicle systems.

Per WABCO, Sheppard is being divested in accordance with the Antitrust Division of the U.S. Department of Justice’s review of the proposed merger between WABCO and ZF Friedrichshafen (ZF), and the settlement order approved by the U.S. District Court for the District of Columbia.

Reportedly, German auto parts maker ZF is set to acquire WABCO for $136.50 per share (representing 13% premium). The merged entity will expand its global presence and reduce the risk on investments required for transforming technologies across domains. This merger will also result in the formation of 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.

The Sheppard transaction is subject to customary closing conditions and regulatory approvals. It also depends on the closing of the WABCO's ZF acquisition, which is expected early this year pursuant to the receipt of the remaining regulatory approvals.

Shares of WABCO have outperformed the industry it belongs to over the past year. Over this time frame, it has rallied 17% compared with the industry’s rise of 2.5%.

Further, WABCO has been gaining business contracts from existing customers as well as the new ones. The firm will benefit from the increasing shift toward electric vehicles. The company has signed a $950-million deal with a commercial vehicle manufacturer to provide driver assistance systems and other technologies. It has also entered into a contract with Hyundai Motor to provide technologies to medium-duty trucks. These business contracts are likely to boost the firm’s sales and prospects in the days to come.

Zacks Rank & Stocks to Consider

WABCO currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Auto-Tires-Trucks sector include Gentherm Inc (THRM - Free Report) , Gentex Corporation (GNTX - Free Report) and SPX Corporation (SPXC - Free Report) . While Gentherm flaunts a Zacks Rank #1 (Strong Buy), Gentex Corporation and SPX carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gentherm has a projected earnings growth rate of 20.60% for the ongoing year. Its shares have gained 9.8% over the past year.

Gentex Corporation has an estimated earnings growth rate of 7.32% for 2020. The company’s shares have appreciated 45.8% in a year’s time.

SPX has an expected earnings growth rate of 8.09% for the current year. The stock has rallied 60% in the past year.

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