Share price of TRW Automotive Holdings Corp. ( TRW ) rallied 1.9% to $102.88 on Sep 11 after the company announced an agreement to sell its engine valve business to Federal-Mogul Holdings Corporation ( FDML ) for $385 million. The deal is expected to be completed by the first quarter of 2015 subject to customary conditions, including regulatory, regional Supervisory Board and local works council approvals.
After the divestment of the engine valve business, TRW will be able to focus on its safety products line which includes active and passive safety technologies. The company intends to utilize the proceeds from this transaction for general corporate purposes.
The engine valve business of TRW generated annual sales of approximately $610 million. Thus, the divestiture will have a negative impact on the company's revenues. TRW expects Federal-Mogul to benefit from this acquisition which will boost the latter's powertrain business and position it favorably in the industry.
Meanwhile, TRW is optimistic about its full-year 2014 performance and anticipates industry production of 17 million units in North America and 19.9 million units in Europe. Vehicle production in China is also expected to increase.
TRW is a leading manufacturer of advanced technology products and services for the automotive markets. Headquartered in Michigan, the company operates in 24 countries through its subsidiaries. These operations primarily involve design, manufacture and sale of active and passive safety-related products. The company currently holds a Zacks Rank #2 (Buy).
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