For 560 million euros, Hon Hai announced the acquisition of a 50% stake in a subsidiary of ZF

On July 24, Hon Hai Group announced the establishment of a deep partnership with German auto parts supplier ZF (ZF Group), and intends to spend about 560 million euros to acquire about 50% of ZF's ZF Chassis Modules GmbH. In order to establish cooperative relations with international automobile manufacturers such as Mercedes-Benz, BMW, Stellantis, and add help to its electric vehicle OEM layout.

It is understood that Germany ZF is the world's third largest automotive components Tier 1 supplier. According to market research institutions, the axle system outsourcing assembly market size in 2021 is 16 billion euros, and ZF ranks first in the world with 26% market share.

ZF Chassis Modules GmbH, a subsidiary of ZF that manufactures and assembles axle systems for passenger cars, has a current enterprise value of approximately €1 billion, with revenues expected to exceed €4 billion in 2023. It currently has 25 locations around the world and approximately 3,300 employees.

Currently, ZF's top three customers are Mercedes-Benz, BMW and Stellantis (a joint venture between PSA Group and Fiat Chrysler Group FCA). Hon Hai is expected to build relationships with traditional German automakers, as well as opportunities for product introduction (Design-in).

Hon Hai Chairman Liu Yangwei said: "We are very excited about this partnership, Hon Hai's global operating network and supply chain management expertise, combined with ZF Chassis Modules GmbH's expertise, diligence and commitment, will create more value for both shareholders." In the future, Hon Hai will continue to work with ZF to explore more cooperation opportunities in the field of transportation and mobility.

Zf Chief Executive Peter Klein said that by partnering with Hon Hai, it would be tantamount to acquiring a strong strategic partner. The two companies complement each other's strengths and will work together to explore new customer bases and expand business. Klein told Reuters, "This business will grow very fast, but the margins are relatively low. New funding is needed ", which is why ZF has been looking for a partner. Zf wants to use the proceeds from the sale to reduce debt, the report said.

Hon Hai said it plans to acquire ordinary shares of ZF Chassis Modules GmbH for up to 500 million euros and special shares for up to 60 million euros (about NT $2.105 billion), for a total of up to 560 million euros. Acquire approximately 50% stake in ZF Chassis Modules GmbH and the actual transaction amount will be disclosed after the joint venture is finalized in six to nine months.

On the other hand, ZF is usually involved in the planning of new cars in the engineering design stage, which helps Hon Hai to grasp the blueprint of customers' products, plus the contract period with customers is as long as six to eight years, free cash flow is positive, and revenue and profit are stable, most of the current car manufacturers focus on electrification and their own products electronic, future business development is promising.