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Law360 (May 6, 2020, 10:35 AM EDT) -- BorgWarner and Delphi Technologies have resolved a dispute concerning their January merger, which had valued Delphi at $3.3 billion, with the companies saying Wednesday that they have amended the deal and remain on track to close during the second half of this year.
The deal between BorgWarner Inc. and Delphi Technologies PLC, originally inked in January, ran into a hiccup in March after Delphi drew the full available amount under its revolving credit facility in the wake of the coronavirus crisis, BorgWarner claimed on March 31 that Delphi breached the transaction, asserting that Delphi's actions represented a material adverse event, or MAE. According to BorgWarner, it had the right to terminate the deal if a resolution was not reached within 30 days.
On Wednesday, the companies said they have resolved the matter, amended the terms of the agreement, and still expect to complete the deal during the second half of the year.
Under the terms of the amended agreement, BorgWarner consents to Delphi's draw down of its revolver. The updated deal also includes new closing conditions, which require that, at the time the agreement closes, the total amount of Delphi's outstanding revolver borrowings can not exceed $225 million.
The companies have also revised the exchange ratio; in the original agreement, Delphi shareholders were set to receive 0.4534 shares of BorgWarner common stock for each Delphi Technologies share they own, with the result being a merged entity owned 84% by BorgWarner stockholders and 16% by Delphi stockholders.
Now, Delphi shareholders will receive 0.4307 shares of BorgWarner common stock for each Delphi share they own, and those percentages have changed to 85% ownership by BorgWarner stockholders and 15% ownership by Delphi stockholders. The new agreement values Delphi at about $11.61 per share, or about $1 billion.
"BorgWarner does not believe the revised exchange ratio or the potential for additional indebtedness at Delphi Technologies at the closing materially alters its views on the expected leverage ratio or the financial outlook of the combined company," the press release noted. "BorgWarner intends to provide an update on the overall financial profile and outlook for the combined company at or around the time of closing."
Together, the companies say they'll be a major propulsion system provider for light and commercial vehicle manufacturers and the aftermarket. They'll offer combustion, hybrid and electric propulsion systems. Combined, BorgWarner and Delphi Technologies estimate that they generated net sales of more than $14 billion in fiscal 2019.
The agreement is still subject to approval from Delphi shareholders, and must also still pass regulatory muster, among other closing conditions. The companies expect to complete the deal during the second half of this year.
Simpson Thacher & Bartlett LLP acted as legal adviser to BorgWarner, with BofA Securities Inc. and Rockefeller Financial LLC serving as financial advisers.
The Simpson Thacher team includes M&A Partners Mario Ponce and Katie Sudol, and associates Philip Cooper, Michael Chao, Ngozi Nezianya, Teresita Acedo and Ashley Gherlone.
Kirkland & Ellis LLP acted as legal adviser to Delphi Technologies, with Goldman Sachs International serving as financial adviser.
The Kirkland team was led by corporate partners Eric Schiele, David Klein and Joseph Halloum; capital markets partner Sophia Hudson and associate Zoey Hitzert; tax partners Dean Shulman and Sehj Vather; debt finance partners Melissa Hutson and Omar Raddawi; and technology & IP transactions partners Seth Traxler and Shellie Freedman.
Sullivan & Cromwell LLP represents Goldman Sachs as financial adviser to Delphi Technologies, with a team including corporate partner Stephen M. Kotran and associate Adrienne R. W. Bradley.
--Editing by Katherine Rautenberg.
Correction: An earlier version of this story didn't mention the new valuation of Delphi under the revised deal terms.
For a reprint of this article, please contact reprints@law360.com.
