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Is BorgWarner's $3.3B Buyout of Delphi Technologies at Risk?

BorgWarner Inc. BWA recently announced that it could terminate its $3.3-billion deal to acquire Delphi Technologies DLPH, 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.

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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, Honda Motor HMC, 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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BorgWarner Inc. (BWA) : Free Stock Analysis Report
 
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Delphi Technologies PLC (DLPH) : Free Stock Analysis Report
 
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