ZF Friedrichshafen has agreed to buy Wabco for more than $7 billion, an acquisition it has long targeted to bolster its expertise in trucks and driver-assistance systems.
Transmissions supplier ZF has been on the lookout for a strategic partner as it foresees semi-autonomous driving functions and vehicle connectivity developing into important new business areas.
Wabco specializes in advanced driver assistance systems for trucks and trailers, key building blocks for developing autonomous driving technologies, a major growth area for ZF.
The market for advanced driver assistance systems and autonomous vehicles is expected to grow from about $3 billion in 2015 to $96 billion in 2025 and $290 billion in 2035, according to Goldman Sachs.
"The combination of both businesses is expected to further accelerate the development of new technologies to enable autonomous commercial vehicle functions, making ZF less dependent on the economic cycle of the passenger car industry," ZF said in a statement.
ZF CEO Wolf-Henning Scheider said the acquisition will enable the company's commercial vehicle division to expand its expertise in vehicle dynamics control.
ZF has done large acquisitions in the past and in 2014 bought TRW Automotive for $13.5 billion to expand into the potentially lucrative self-driving car market.
Previously, ZF has said it plans to invest more than 12 billion euros ($13.6 billion) into e-mobility and autonomous driving.
The all-cash deal is for $136.50 per share and represents a 13 percent premium to Wabco's closing price of $120.75 on Feb. 26.
Last month Wabco reported record annual sales and earnings, posting net income of $418 million on revenue of $3.83 billion. It employs about 16,000 people in 40 countries.
Following the acquisition, ZF, which is based in Germany, expects to generate about $44 billion a year in revenue.
Wabco is headquartered in Brussels, Belgium but has its executive offices in Auburn Hills, Michigan.
ZF and Wabco already jointly developed an evasive maneuver assist system, which combines Wabco's braking, stability and vehicle dynamics control systems for trucks with ZF's active steering technology.
The two companies said the deal, which is expected to close in 2020, had been unanimously approved by Wabco's board of directors. The deal is contingent on ZF clinching more than 50 percent of Wabco's shares.
Reuters contributed to this report
