May 6, 2020 / 12:06 PM / 3 months ago

UPDATE 3-Auto parts maker BorgWarner on track to close Delphi buyout this year

* Amended deal terms reduce Delphi's equity value by 5%

* BorgWarner's Seneca plant resumes operations after tornado damage

* Shares of Delphi surge 16%, BorgWarner jumps over 6% (Adds details on BorgWarner's Seneca plant resuming production, analyst's comment, shares)

By Ben Klayman and Ankit Ajmera

May 6 (Reuters) - Auto parts maker BorgWarner said on Wednesday it had resolved a dispute with UK-based smaller rival Delphi Technologies and was on track to acquire it by the second half of 2020.

Delphi and BorgWarner, which make auto transmissions for vehicles, saw shares surge as much as 16% and over 6% respectively in morning trade.

The fate of the deal became uncertain in March when BorgWarner threatened to end the agreement, after Delphi drew down on a $500 million credit line without BorgWarner's approval.

BorgWarner said it has approved Delphi' drawdown, but had amended the merger terms, reducing Delphi's equity value by 5%.

Delphi's shareholders will now get 0.4307 shares of BorgWarner common stock for each Delphi share, compared with 0.4534 BorgWarner shares agreed upon earlier.

The revised deal values Delphi at about $11.61 per share, or about $1 billion, representing a premium of 18.5% to its closing price on Tuesday. Delphi shareholders will own 15% of the combined company after the close of the deal, compared with 16% earlier.

BorgWarner's biggest deal in at least a decade seeks to add Delphi's expertise in power electronics and expand BorgWarner's clean technology portfolio.

"We do believe it's a fair valuation for an asset that does solidify BorgWarner's future leadership positioning as a complete-suite provider of electrified propulsion solutions," KeyBank Capital Markets analyst James Picariello said.

BorgWarner also reported a smaller-than-expected fall in first-quarter profit, while lowering its full-year sales outlook by about 23% at the mid-point to $7.63 billion, as several automakers cut production drastically due to the coronavirus crisis.

The Auburn Hills, Michigan-based company said it had liquidity of more than $3 billion to support its operations through 2020.

BorgWarner, which disclosed extensive damage at its Seneca, South Carolina plant in April from a tornado, said that the factory had resumed some production on May 4 and would ramp up manufacturing of parts through the rest of the month.

The plant makes transfer cases for some of Ford Motor Co , Fiat Chrysler Automobiles N.V. and Toyota Motor Corp's most profitable vehicles, including large SUVs.

BorgWarner said insurance is likely to cover property losses, reconstruction costs, as well as replacement of lost profits.

On an adjusted basis, BorgWarner earned 77 cents per share in the first quarter ended March 31, beating analysts' average estimate of 50 cents per share, according to IBES data from Refinitiv. But it was less than earnings of $1 per share in the year-ago period.

BorgWarner's net sales declined about 11% to $2.28 billion, but topped the Wall Street estimate of $2.03 billion. (Reporting by Ben Klayman in Detroit and Ankit Ajmera in Bengaluru; Editing by Steve Orlofsky, Rashmi Aich and Vinay Dwivedi)

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