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Delphi Shares Soar 15% After Buyout Terms Are Amended

By Daniel Miller - May 6, 2020 at 11:12AM

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Delphi and BorgWarner revised a deal they originally agreed to in January.

What happened

Shares of Delphi Technologies (DLPH), a leading global supplier of products and solutions to the automotive and commercial vehicle market, jumped 15% Wednesday morning after the company reached an agreement with BorgWarner (BWA 2.50%) to amend terms of their buyout deal.

So what

Investors may recall BorgWarner's previous assertion that Delphi Technologies breached the original transaction agreement, which they entered into on Jan. 28, when it drew down on its $500 million revolving credit facility. As of today, the two companies have amended certain terms of the deal, and BorgWarner will acquire Delphi in an all-stock transaction.

The agreement comes with some stipulations. For example, at the close of the transaction, Delphi's outstanding revolver borrowings must not exceed $225 million. Another twist to the amended agreement is that Delphi shareholders will receive 0.4307 shares of BorgWarner common stock for each Delphi share, a 5% reduction from the prior exchange ratio.

vehicle manufacturing assembly line

Image source: Getty Images.

Now what

In a press release, BorgWarner CEO Frederic Lissalde said: "We have a great deal of respect for Delphi Technologies' team around the world and look forward to welcoming them to BorgWarner. We are confident that together we will be able to move faster to address market trends toward electrification."  

The acquisition will bolster BorgWarner's power electronics products and its scale, in addition to being the next logical step in the company's propulsion strategy as it balances its business among combustion, hybrid, and electric vehicles. The transaction is expected to close in the second half of 2020 as the entire automotive industry grapples with the effects of COVID-19.

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Stocks Mentioned

BorgWarner Inc. Stock Quote
BorgWarner Inc.
BWA
$35.69 (2.50%) $0.87
Delphi Technologies PLC Stock Quote
Delphi Technologies PLC
DLPH

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