XML 27 R11.htm IDEA: XBRL DOCUMENT
v3.22.0.1

ACQUISITIONS AND DISPOSITIONS | 12 Months Ended
--- | ---
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DISPOSITIONS | ACQUISITIONS AND DISPOSITIONS Acquisitions AKASOL AG On June 4, 2021, the Company completed its voluntary public takeover offer for shares of AKASOL AG (“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. The Company paid approximately €648 million ($788 million) to settle the offer from current cash balances, which included proceeds received from its public offering of 1.0% Senior Notes due May 2031 completed on May 19, 2021. Refer to Note 14, “Notes Payable and Debt,” to the Consolidated Financial Statements for more information. Following the settlement of the offer, AKASOL became a consolidated majority-owned subsidiary of the Company. The Company also consolidated approximately €64 million ($77 million) of gross debt of AKASOL. Subsequent to the completion of the voluntary public takeover offer, the Company purchased additional shares of AKASOL for €28 million ($33 million) increasing its ownership to 93% as of December 31, 2021.The acquisition further strengthens BorgWarner’s commercial vehicle and industrial electrification capabilities, which positions the Company to capitalize on what it believes to be a fast-growing battery module and pack market. On August 2, 2021, the Company initiated a merger squeeze out process under German law for the purpose of acquiring 100% of AKASOL. On December 17, 2021, the shareholders of AKASOL voted to mandatorily transfer to ABBA BidCo. AG, a wholly owned indirect subsidiary of the Company, each issued and outstanding share of AKASOL held by shareholders that did not tender their shares in the Company’s previously completed exchange offer for AKASOL shares (the “Squeeze Out”). In exchange for the AKASOL shares transferred in the Squeeze Out, the Company will pay appropriate cash compensation, in the amount of €119.16 per share, which was determined by a valuation firm and the adequacy of which was examined by an independent, court-appointed auditor. The noncontrolling interest in AKASOL of approximately €51 million ($58 million) to be acquired through the Squeeze Out was reclassified to Other current liabilities in the Company’s Consolidated Balance Sheet as it was deemed mandatorily redeemable. No shareholder objections were filed during the statutory contestation period, and on February 10, 2022, the Company completed the registration of the Squeeze Out resulting in 100% ownership. The Company expects to settle the Squeeze Out with AKASOL minority shareholders in the first quarter of 2022. The initial purchase price was allocated on a preliminary basis as of June 4, 2021. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable. Certain estimated values for the acquisition, including goodwill and deferred taxes, are not yet finalized, and the preliminary purchase price allocations are subject to change as the Company completes its analysis. The final valuation of assets acquired and liabilities assumed may be different from the estimated values shown below. The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of June 4, 2021, the acquisition date:
(in millions) | Initial Allocation |  | Measurement Period Adjustments |  | Revised Allocation
ASSETS |  |  |  |  |
Cash and cash equivalents (including restricted cash of $16 million) | $ | 29 |  |  | $ | — |  |  | $ | 29 |
Receivables, net | 16 |  |  | — |  |  | 16 |
Inventories, net | 42 |  |  | (2) |  |  | 40 |
Prepayments and other current assets | 5 |  |  | — |  |  | 5 |
Property, plant and equipment, net | 106 |  |  | (3) |  |  | 103 |
Goodwill | 707 |  |  | (3) |  |  | 704 |
Other intangible assets, net | 130 |  |  | — |  |  | 130 |
Other non-current assets | — |  |  | 7 |  |  | 7 |
Total assets acquired | 1,035 |  |  | (1) |  |  | 1,034 |
LIABILITIES |  |  |  |  |
Notes payable and other short-term debt | 8 |  |  | — |  |  | 8 |
Accounts payable | 22 |  |  | — |  |  | 22 |
Other current liabilities | 13 |  |  | 6 |  |  | 19 |
Long-term debt | 69 |  |  | — |  |  | 69 |
Other non-current liabilities | 39 |  |  | (7) |  |  | 32 |
Total liabilities assumed | 151 |  |  | (1) |  |  | 150 |
Noncontrolling interests | 96 |  |  | — |  |  | 96 |
Net assets and noncontrolling interest acquired | $ | 788 |  |  | $ | — |  |  | $ | 788 |
Any excess of the purchase price over the estimated fair value of net identifiable assets was recognized as goodwill. Goodwill of $704 million, including the impact of measurement period adjustments, was recorded within the Company’s Air Management segment. The goodwill consists of the Company’s expected future economic benefits that will arise from acquiring this business, which is established in making next-generation products for electric vehicles and the potential development and deployment of future technologies, across a global customer base, in this market and across adjacent industries. The goodwill is not expected to be deductible for tax purposes. The following table summarizes the other intangible assets acquired:
(in millions) | Estimated Life |  | Estimated Fair Value
Amortized intangible assets: |  |  |
Developed technology | 5 years |  | $ | 70 |
Customer relationships | 11 years |  | 25 |
Total amortized intangible assets |  |  | 95 |
Unamortized trade names | Indefinite |  | 35 |
Total other intangible assets |  |  | $ | 130 |
Generally accepted valuation practice indicates that assets and liabilities may be valued using a range of methodologies. The property, plant and equipment acquired were valued using a combination of cost and market approaches. Goodwill and identifiable intangible assets were valued using the income approach. Noncontrolling interests were valued using a market approach. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values; however, management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate. Following the June 4, 2021 acquisition date, AKASOL’s operations had net sales of $67 million for the year ended December 31, 2021. The impact on net earnings was immaterial for the year ended December 31, 2021. Due to its insignificant size relative to the Company, supplemental pro forma financial information of the combined entity for the current and prior reporting period is not provided. Delphi Technologies PLC On October 1, 2020, the Company completed its acquisition of 100% of the outstanding ordinary shares of Delphi Technologies PLC (“Delphi Technologies”) from the shareholders of Delphi Technologies pursuant to the terms of the Transaction Agreement, dated January 28, 2020, as amended on May 6, 2020, by and between the Company and Delphi Technologies (the “Transaction Agreement”). Pursuant to the terms of the Transaction Agreement, the Company issued, in exchange for each Delphi Technologies share, 0.4307 of a share of common stock of the Company, par value $0.01 per share and cash in lieu of any fractional share. In the aggregate, the Company delivered consideration of approximately $2.4 billion. The acquisition has strengthened the Company’s electronics and power electronics products, strengthened its capabilities and scale, enhanced key combustion, commercial vehicle and aftermarket product offerings, and positioned the Company for greater growth as electrified propulsion systems gain momentum. Upon closing, the Company also assumed approximately $800 million (par value) in aggregate principal amount of Delphi Technologies’ outstanding 5.0% Senior Notes due October 2025. The following table summarizes the purchase price for Delphi Technologies:
(in millions, except for share data) |
BorgWarner common stock issued for purchase of Delphi Technologies | 37,188,819
BorgWarner share price at October 1, 2020 | $ | 39.54 |
Fair value of stock consideration | $ | 1,470 |
Stock compensation consideration | 7
Total stock consideration | $ | 1,477 |
Cash consideration | 18 |
Repayment of Delphi Technologies’ debt | 896 |
Total consideration | $ | 2,391 |
The Company finalized its valuation of the assets and liabilities of the Delphi Technologies acquisition during the third quarter of 2021. The following table summarizes the final fair values of assets acquired and liabilities assumed as of the acquisition date and subsequent measurement period adjustments:
(in millions) | Initial Allocation |  | Measurement Period Adjustments |  | Revised Allocation
ASSETS |  |  |  |  |
Cash and cash equivalents | $ | 460 |  |  | $ | — |  |  | $ | 460 |
Receivables, net | 901 |  |  | (4) |  |  | 897 |
Inventories, net 1 | 398 |  |  | (5) |  |  | 393 |
Prepayments and other current assets | 77 |  |  | 2 |  |  | 79 |
Property, plant and equipment, net | 1,548 |  |  | (31) |  |  | 1,517 |
Investments and long-term receivables | 103 |  |  | (1) |  |  | 102 |
Goodwill | 710 |  |  | 44 |  |  | 754 |
Other intangible assets, net | 760 |  |  | — |  |  | 760 |
Other non-current assets | 359 |  |  | 1 |  |  | 360 |
Total assets acquired | 5,316 |  |  | 6 |  |  | 5,322 |
LIABILITIES |  |  |  |  |
Notes payable and other short-term debt | 2 |  |  | — |  |  | 2 |
Accounts payable | 692 |  |  | 1 |  |  | 693 |
Other current liabilities | 609 |  |  | 9 |  |  | 618 |
Long-term debt | 934 |  |  | — |  |  | 934 |
Other non-current liabilities: |  |  |  |  |
Retirement-related | 313 |  |  | — |  |  | 313 |
Other non-current liabilities | 286 |  |  | (4) |  |  | 282 |
Total liabilities assumed | 2,836 |  |  | 6 |  |  | 2,842 |
Noncontrolling interest | 89 |  |  | — |  |  | 89 |
Net assets and noncontrolling interest acquired | $ | 2,391 |  |  | $ | — |  |  | $ | 2,391 |
_____________________________ 1 During the three months ended December 31, 2020, the Company incurred $27 million of expense related to the amortization of the inventory fair value adjustment. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. At the acquisition date, goodwill of $754 million, including the impact of measurement period adjustments, was allocated across the Company’s four segments, as noted in the table below. The goodwill consists of the Company’s expected future economic benefits that will arise from expected future product sales and operational synergies from combining Delphi Technologies with its existing business and is not deductible for tax purposes.
(in millions) |
Air Management | $ | 150 |
e-Propulsion & Drivetrain | 301 |
Fuel Injection | — |
Aftermarket | 303 |
Total acquisition date goodwill | $ | 754 |
The following table summarizes the other intangible assets acquired:
(in millions) | Estimated Life |  | Estimated Fair Value
Amortized intangible assets: |  |  |
Developed technology | 14 years |  | $ | 270 |
Customer relationships | 15 years |  | 380 |
Total amortized intangible assets |  |  | 650 |
Unamortized trade name | Indefinite |  | 110 |
Total other intangible assets |  |  | $ | 760 |
Generally accepted valuation practice indicates that assets and liabilities may be valued using a range of methodologies. The property, plant and equipment and inventory acquired were valued using a combination of cost and market approaches. Goodwill, identifiable intangible assets, noncontrolling interests and the equity method investment were valued using the income approach. Management used a third-party valuation firm to assist in the determination of the purchase accounting fair values; however, management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate. The following table summarizes the net sales and earnings related to Delphi Technologies’ operations that have been included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2020, following the October 1, 2020 acquisition date:
(in millions) |
Net sales | $ | 1,120 |
Net earnings attributable to BorgWarner Inc. | $ | 30 |
Pro forma financial information (unaudited): The following table summarizes, on a pro forma basis, the combined results of operations of the Company and Delphi Technologies business as though the acquisition and the related financing had occurred as of January 1, 2019. The pro forma results are not necessarily indicative of either the actual consolidated results had the acquisition of Delphi Technologies occurred on January 1, 2019 or of future consolidated operating results. Actual operating results for the year ended December 31, 2021 have been included in the table below for comparative purposes.
| Actual |  | Pro forma (unaudited)
| Year Ended December 31,
(in millions) | 2021 |  | 2020 |  | 2019
Net sales | $ | 14,838 |  |  | $ | 12,792 |  |  | $ | 14,529 |
Net earnings attributable to BorgWarner Inc. | $ | 537 |  |  | $ | 616 |  |  | $ | 625 |
These pro forma amounts have been calculated after applying the Company’s accounting policies and the results presented above primarily reflect (i) depreciation adjustments relating to fair value adjustments to property, plant and equipment; (ii) amortization adjustments relating to fair value estimates of intangible assets; (iii) incremental interest expense, net on debt related transactions; (iv) cost of goods sold adjustments relating to fair value adjustments to inventory; and (v) stock-based compensation that was accelerated and settled on the date of acquisition. In 2020, the Company incurred $89 million of acquisition-related costs. These expenses are included in Other operating expense (income), net in the Company’s Consolidated Statement of Operations for the year ended December 31, 2020 and are reflected in the pro forma earnings for the year ended December 31, 2019, in the table above. Romeo Power, Inc. In May 2019, the Company invested $50 million in exchange for a 20% equity interest in Romeo Systems, Inc., now known as Romeo Power, Inc., (“Romeo”), a technology-leading battery module and pack supplier that was then privately held. The Company accounted for this investment in Series A-1 Preferred Stock of Romeo under the measurement alternative in ASC Topic 321, “Investments - Equity Securities” for equity securities without a readily determinable fair value. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. On December 29, 2020, through the business combination of Romeo Systems, Inc. and special purpose acquisition company RMG Acquisition Corporation, a new entity, Romeo Power, Inc., became a publicly listed company. The Company’s ownership in Romeo was reduced to 14%, and the investment no longer qualified for the measurement alternative under ASC Topic 321 as the investment then had a readily determinable fair value. During the year ended December 31, 2020, the Company recorded a net gain of $382 million, which primarily related to adjusting the Company’s investment carrying value to fair value. The investment is recorded at fair value on an ongoing basis with changes in fair value being recognized in Unrealized (loss) gain on equity securities in the Consolidated Statements of Operations. During the year ended December 31, 2021, the Company recorded a loss of $362 million to adjust the carrying value of the Company’s investment to fair value. As of December 31, 2021 and 2020, the investment’s fair value was $70 million and $432 million, respectively, which is reflected in Investments and long-term receivables in the Company’s Consolidated Balance Sheets. In September 2019, the Company and Romeo contributed total equity of $10 million and formed a new joint venture, BorgWarner Romeo Power LLC (“Romeo JV”), in which the Company owned a 60% interest. Romeo JV is a variable interest entity focusing on producing battery module and pack technology. The Company was the primary beneficiary of Romeo JV and has consolidated Romeo JV in its consolidated financial statements. On October 25, 2021, the Company delivered written notice to Romeo that the Company was electing to exercise its right to put its ownership stake in Romeo JV to Romeo. Based on an independent appraisal, the Company’s interest in Romeo JV was valued at $30 million. As the estimated fair value, less costs to sell, of the Company’s investment exceeded its carrying value, no adjustment to the carrying value was required at December 31, 2021. In February 2022, the Company completed the sale of its 60% interest in Romeo JV for $29 million, the fair value of $30 million reduced by a 5% discount pursuant to the joint venture agreement. As a result of the sale, the Company has no further rights in or involvement with Romeo JV. The exercise of the Romeo JV put option has no bearing on the Company’s ownership stake in Romeo. Rinehart Motion Systems LLC and AM Racing LLC On January 2, 2019, the Company acquired Rinehart Motion Systems LLC and AM Racing LLC, two established companies in the specialty electric and hybrid propulsion market, for approximately $15 million, of which $10 million was paid in the first quarter of 2019, $2 million was paid during each of the first quarter 2020 and 2021, the remaining $1 million will be paid in the first quarter of 2022. Water Valley Divestiture In 2021, the Company announced its strategy to aggressively grow its electrification portfolio over time through organic investments and technology-focused acquisitions. Additionally, the Company announced a plan to dispose of certain internal combustion assets in support of that strategy. In December 2021, the Company entered into a definitive agreement to sell its Water Valley, Mississippi manufacturing facility (“Water Valley”) and the associated solenoid, transmission control module and stop/start accumulator system business for an estimated $57 million. The consideration consisted of $39 million in cash and notes and up to $30 million in potential earn out payments. The Company included $18 million as contingent consideration in the proceeds, which reflects its current estimate of the payout pursuant to the earn out. The contingent consideration and promissory note were included in Investments and long-term receivables on the Consolidated Balance Sheet. Water Valley had net sales of $177 million during the year ended December 31, 2021 and was included in the Company’s e-Propulsion & Drivetrain segment. On December 31, 2021, upon the closing of the transaction, based upon the final transaction priced agreed to in the fourth quarter of 2021, the Company recorded a loss on divestiture of $22 million. As a result of this transaction, assets of $99 million, including allocated goodwill of $12 million, and liabilities of $20 million were removed from the Company’s Consolidated Balance Sheet as of December 31, 2021. Subsequent Event On February 15, 2022, the Company announced that it signed an equity transfer agreement under which BorgWarner will acquire Santroll Automotive Components, a carve-out of Santroll Electric Auto’s eMotor business, for up to ¥1.4 billion ($220 million), comprised of a closing payment of ¥1.1 billion ($173 million) and an earn out of ¥0.3 billion ($47 million). The transaction is expected to close in the first quarter of 2022.

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_MergersAcquisitionsAndDispositionsDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration