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Is BorgWarner's $3.3B Buyout of Delphi Technologies at Risk?
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BorgWarner Inc. (BWA - Free Report) recently announced that it could terminate its $3.3-billion deal to acquire Delphi Technologies , after the targeted auto-parts manufacturer tapped out its credit line without seeking permission from its acquirer.
Delphi drew down its full $500-million revolving credit facility to brace for the coronavirus crisis. Following this, BorgWarner served a notice to Delphi stating this action had violated their agreement and that the latter has 30 days to fix the issue.
This January, BorgWarner announced that it will acquire Delphi in an all-stock deal that valued the latter’s equity at $1.5 billion, bringing together two auto suppliers preparing for transformational shift to hybrid and electric vehicles in the industry. The deal valued Delphi at $3.3 billion, including debt.
Nevertheless, both companies continue to believe in the long-term strategic value of the transaction and are still working together toward closing the transaction in the second half of 2020. There is no assurance, however, that BorgWarner and the company will reach a mutually-acceptable resolution or that the transaction will close.
The coronavirus pandemic has become a concern for other global auto biggies as well, including Tesla (TSLA - Free Report) , Honda Motor (HMC - Free Report) , Toyota Motor, Volkswagen AG, Goodyear Tire, Nissan, Harley-Davidson and Hyundai Motor. Several automakers have closed their factories and suspended production, while the others plan to change manufacturing processes and cut production levels in their plants. The pandemic has not only dampened consumer sentiment and marred vehicle demand but also distorted the global supply-chain balance.
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Is BorgWarner's $3.3B Buyout of Delphi Technologies at Risk?
BorgWarner Inc. (BWA - Free Report) recently announced that it could terminate its $3.3-billion deal to acquire Delphi Technologies , after the targeted auto-parts manufacturer tapped out its credit line without seeking permission from its acquirer.
Delphi drew down its full $500-million revolving credit facility to brace for the coronavirus crisis. Following this, BorgWarner served a notice to Delphi stating this action had violated their agreement and that the latter has 30 days to fix the issue.
This January, BorgWarner announced that it will acquire Delphi in an all-stock deal that valued the latter’s equity at $1.5 billion, bringing together two auto suppliers preparing for transformational shift to hybrid and electric vehicles in the industry. The deal valued Delphi at $3.3 billion, including debt.
Nevertheless, both companies continue to believe in the long-term strategic value of the transaction and are still working together toward closing the transaction in the second half of 2020. There is no assurance, however, that BorgWarner and the company will reach a mutually-acceptable resolution or that the transaction will close.
BorgWarner currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The coronavirus pandemic has become a concern for other global auto biggies as well, including Tesla (TSLA - Free Report) , Honda Motor (HMC - Free Report) , Toyota Motor, Volkswagen AG, Goodyear Tire, Nissan, Harley-Davidson and Hyundai Motor. Several automakers have closed their factories and suspended production, while the others plan to change manufacturing processes and cut production levels in their plants. The pandemic has not only dampened consumer sentiment and marred vehicle demand but also distorted the global supply-chain balance.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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