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German Auto Component Company ZF Friedrichshafen Puts Out €2.7bn For Eurobonds

Business acquisitions are nothing uncommon to the motoring industry, with companies like EBC Brakes familiar with the prospect, as many major companies are moving constantly to get their hands on as many affiliates and subsidiaries as they can. One of the latest of such developments is the acquisition of the US-based braking system company, Wabco, by the German company ZF Friedrichshafen (ZF), which happened earlier in March of 2019.

ZF would acquire the US-based company for US$136.50/share, amounting to a total equity value of approximately US$7bn.

Now, the German auto component manufacturer is taking steps to refinance the acquisition. Their latest move was the placing of Eurobonds, amounting to a total of €2.7bn, into the capital market. The bonds were issued in four separated tranches, with maturities varying from four to ten years. Notably, a lot of the bonds were in high demand, and were oversubscribed multiple times, according to a report from ZF.

ZF CFO Konstantin Sauer says that, in spite of the challenging environment that the market is dealing with right now, something that companies like EBC Brakes are fighting against, the issue of Eurobonds have been met with positive reception from their investors. He says that this shows how confident their investors are in ZF’s plans for the future, which includes the acquisition of Wabco, as the company moves to include braking technology in their expertise portfolio.

Following the German company’s successful bonding of the loans, amounting to €2.1bn in early October 2019, their acquisition of the US-based braking company Wabco is now complete. ZF Europe Finance B.V., a ZF Friedrichshafen AG subsidiary, will be in charge of issuing the Eurobonds to the relevant parties.

The transaction involved major names in financing like Citibank, Bank of America, BNP Paribas, and even J.P. Morgan.

As for the acquisition of Wabco itself, many in the German motoring industry are saying that this move would allow ZF to catch up with its competitors; Bosch and Continental, which are the two largest German automotive suppliers in operation today. With Wabco, ZF managed to hit a combined sales total of approximately €40bn, compared to its competitions’ €47bn, and €44bn, respectively.


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