FRANKFURT (Bloomberg) -- Robert Bosch is an unexpected beneficiary of ZF Friedrichshafen's plans to purchase TRW Automotive.
Bosch, the world's largest auto parts supplier, on Monday said it planned to gain full control over the steering joint venture it co-founded with ZF in 1999. The JV makes electronic steering systems that are critical to the development of driverless cars.
ZF was forced to sell its 50 percent stake in the JV to avoid antitrust issues in the purchase of TRW, which also has a large steering systems business that is heavily involved in developing technology to make autonomous driving a reality.
Hours after saying it would sell its stake in the JV to Bosch, ZF announced plans Monday to purchase TRW for $105.60 a share, which is a premium of 16 percent over the U.S. company's closing price on July 9, before news of ZF's buyout interest emerged.
ZF valued the all-cash transaction at approximately $12.4 billion based on equity value. TRW said it was worth approximately $13.5 billion on an enterprise value basis.
ZF is looking to add electronic components because its transmission business is threatened by electric vehicles, which don't use gearboxes.
Transmissions are "probably going to be a business that's slowly dying. It's no good for a company to be part of a declining industry," said Juergen Pieper, a Frankfurt-based analyst for Bankhaus Metzler.
The combination of closely held ZF and publicly traded TRW will overtake Japan's Denso and Germany's Continental based on global sales. With the deal, ZF's parts sales total about 30 billion euros ($38.8 billion), narrowly trailing Bosch's 30.6 billion euros last year.
The move parallels other deals in the industry as manufacturers of mechanical components seek know-how in electronics to adapt to rising demand for features that prevent accidents and protect passengers and pedestrians.
Modern suppliers need to have a breadth of technology and be "big and powerful," ZF CEO Stefan Sommer told journalists in a telephone conference Monday.
With TRW, the Friedrichshafen, Germany-based company can target "automotive megatrends," such as fuel efficiency, increased safety requirements and autonomous driving. Bosch, which helped invent electronic-stability systems that keep cars from skidding off the road, is pushing into those same fields and will be helped by having full control of the steering venture, known as ZF Lenksysteme.
The unit employs 13,000 people in eight countries including the U.S., China and Brazil, and posted sales of 4.1 billion euros last year.
"Today, the driver is steering the car, and tomorrow it'll be the electronics of the car," said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany.
Still, Bosch's preferred scenario may have been to continue to work with ZF on steering components rather than help strengthen a competitor by buying half the JV for an undisclosed sum.
"Bosch is gaining a significant competitor that they'll have to battle," Dudenhoeffer said. "I don't think it was Bosch's preferred scenario."
The Stuttgart-based manufacturer discounted the threat posed by ZF, as it gains access to what Bosch CEO Volkmar Denner said was "core technology" for driverless vehicles. "We like competition," Denner said Monday on a conference call with reporters. "We have no problem" with ZF's ambitions.