Please ensure Javascript is enabled for purposes of website accessibility

Why Delphi Technologies is Soaring Today

By John Rosevear - Jan 28, 2020 at 1:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Rival BorgWarner will pay a nice premium to acquire the British auto supplier.

What's happening

Shares of U.K.-based auto-industry supplier Delphi Technologies (DLPH) soared on Tuesday, after the company announced that it has agreed to be acquired by U.S. rival BorgWarner (BWA 2.75%) at a substantial premium.

As of 1 p.m. EST, Delphi Technologies' shares were trading up about 60% from Monday's closing price. 

So what

Under the deal, Michigan-based BorgWarner will acquire Delphi Technologies in an all-stock deal that puts Delphi's enterprise value at $3.3 billion. Delphi shareholders will receive 0.4534 shares of BorgWarner stock for each Delphi share they hold -- a valuation that implies a purchase price of $17.39 per share. 

A black sedan with Delphi Technologies logos.

Image source: Delphi Technologies.

Given that Delphi closed at $9.80 on Monday, that's a hefty premium. (It's a good deal for Delphi shareholders.)

The deal values Delphi's equity at about $1.5 billion; the remainder of the enterprise value is the Delphi debt that BorgWarner will assume when the deal closes.

At first look, it appears to be a good deal for BorgWarner too. Delphi focuses on electronics that integrate systems in vehicles; its product line is complementary to BorgWarner's comprehensive powertrain-related offerings. BorgWarner executives say that the deal will boost the company's business as the auto industry continues to move toward hybrid and electric vehicles and self-driving technologies. 

Now what

The deal is expected to close in the second half of 2020, assuming that shareholders and regulators approve the terms. BorgWarner said that the Delphi acquisition will add about $0.31 per share in adjusted earnings annually, starting in 2022, and that cost savings will follow as the companies combine purchasing and marketing functions. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Delphi Technologies PLC Stock Quote
Delphi Technologies PLC
DLPH
BorgWarner Inc. Stock Quote
BorgWarner Inc.
BWA
$38.48 (2.75%) $1.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.