Foxconn's Attempt to Acquire Germany's ZF Group has Halted
Last month, Foxconn's two-year effort to acquire a stake in a division of German auto supplier ZF Group came to a halt because of a significant discrepancy in valuation expectations and a debt load that exceeded estimates, as per reports.
The results from the Taiwanese company's due diligence were shared days prior to ZF Group's announcement in October that it would discontinue its intentions to separate its powertrain technology unit, referred to as Division E.
The division manufactures electric, traditional, and hybrid systems for the automotive industry. Foxconn was exploring the acquisition of a share in it as a part of its growth in the electric vehicle (EV) sector.
Currently, ZF Group is negotiating with Foxconn and other interested entities regarding collaborations on particular products within Division E, as per an insider at ZF familiar with the situation. He was not permitted to be named as he is not allowed to communicate with the media.
The due diligence results, the deal's delay in September, and ZF Group's new strategy with Foxconn are reported for the first time.
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Foxconn's plans came to a standstill after due diligence assessed Division E's value at between 1.5 billion euros ($1.7 billion) and 2.5 billion euros, a significant decrease from the earlier estimate of 3.5 billion euros, as stated in a document prepared by JPMorgan for Foxconn as its deal advisor.
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The equity value of Division E was determined to be negative after due diligence was finalized, contrasting with a previous estimate of 1.3 billion euros, as stated in the September document named "Project Verde - Discussion Materials."
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A note in the margins of the financial results stated: "no agreement if equity value is negative."
The findings from due diligence and the delay of the deal are expected to overshadow Foxconn's goal to expand in EVs, which the company views as a significant source of future growth.