Are Remy Shareholders Getting Enough in BorgWarner Acquisition?

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Remy International Inc. (NASDAQ: REMY) and BorgWarner Inc. (NYSE: BWA) announced Monday morning that the two companies had entered into a definitive merger agreement. Under the agreement, BorgWarner will acquire Remy for $29.50 per share, or a total of roughly $1.2 billion.

Merrill Lynch is acting as the financial advisor for BorgWarner.

For some background on Remy: It is a global producer of rotating electrical components. It has key technologies operations in 10 countries on five continents, and it is considered to be well-positioned for global growth. At the end of December 2014, the company had 6,600 employees, and for the fiscal year, Remy generated sales of $1.2 billion.

As for BorgWarner, it is a product leader in highly engineered components and systems for powertrains. The company has operating manufacturing and technical facilities in 58 locations in 19 countries. BorgWarner delivers powertrain solutions to improve fuel economy, reduce emissions and enhance performance.

James Verrier, president and CEO of BorgWarner, commented on the acquisition:

We look forward to welcoming Remy’s talented employees to BorgWarner. Their products and capabilities will strengthen BorgWarner’s position in the rapidly developing powertrain electrification trend. The acquisition will be another step in executing our plan, to profitably grow revenue to $15 billion by 2020.

So far on the year, Remy shares are down 1.9%, as well as 7.8% in the past 52 weeks, while BorgWarner shares are down 2.0% year to date and 18.2% for the past year.

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Remy has a consensus analyst price target of $28.50, which is just below the acquisition price. The highest price target from analysts is $31.

The transaction is expected to close in the fourth quarter of 2015.

Shares of Remy were up about 43% at $29.33 late on Monday. The stock has a 52-week trading range of $16.31 to $29.35.

BorgWarner shares were up 2.2% at $54.83, in a 52-week trading range of $48.40 to $66.79. The consensus analyst price target is $66.59.