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By Abhijith Ganapavaram and Krystal Hu
(Reuters) -Auto parts maker Aptiv PLC said on Tuesday it would buy software developer Wind River for $4.3 billion in cash to bolster its offerings as the auto industry revs up spending on self-driving and electrification.
The deal, Aptiv's biggest since it was spun off from Delphi Technologies in 2017, will also help it capitalize on the shift to software-oriented vehicles and diversify its revenue stream through Wind River's multi-sector clientele.
Owned by private equity firm TPG Capital, Wind River develops software and cloud systems for industries such as automotive, aerospace and defense.
The purchase also comes at a time when several automakers are moving software development in-house to tap into a multi-billion dollar market, potentially affecting auto parts suppliers.
Using Wind River's software will allow Aptiv to introduce new products "faster and more cost effectively," Joe Massaro, the finance chief of the auto parts maker, said on an analyst call.
The deal marks a win for TPG, which is making a public market debut later this week. The private equity shop paid around $500 million for Wind River when the business was carved out from Intel Corp in 2018, according to sources familiar with the matter.
Wind River has since been growing its product offerings with a focus on industrial, defense and automotive, as well as 5G, counting Aptiv and Verizon Communications as its customers.
The existing partnership with Aptiv had led to the buyer's interest for a deal late last year, one of the sources added.
Wind River has more than 1,700 customers globally and the company posted about $400 million in revenue for 2021, with the figure forecast to rise to $1 billion by 2026.
"We think the rationale was strong long-term growth potential and diversification into other industries (beyond automotive) with robust secular tailwinds," CFRA Research analyst Garrett Nelson said.
Aptiv, which counts Stellantis NV, Volkswagen AG and General Motors Co among its customers, battled supply chain problems for much of 2021 but demand for its automated driving systems has been a bright spot.
The company has forecast 2021 revenue of $15.1 billion to $15.5 billion, which would be its highest in seven years. It plans to fund the deal through a mix of cash on hand and debt.
Aptiv stock fell by 3.3% on Tuesday.
(Reporting by Abhijith Ganapavaram in Bengaluru and Krystal Hu in New York; Editing by Aditya Soni and Richard Pulllin)