Blackstone buys TRW Automotive

The buyout firm has agreed to pay $4.725bn for the automotive parts manufacturer despite The Carlyle Group walking away from the deal.

(PrivateEquityCentral.Net) New York-based private equity firm The Blackstone Group has agreed to acquire the automotive systems and components manufacturer TRW Automotive from defense conglomerate Northrop Grumman in a deal that values the division at $4.725bn.

Northrop Grumman is selling the division as part of its $7.8bn acquisition of manufacturing conglomerate TRW, which was originally announced in July.

Blackstone is committing $500m in equity to the deal, according to a source close to the firm. Northrop Grumman will receive $3.757bn in cash, $600m in debt securities, and an initial equity stake valued at $368m. This equity stake will be reduced when the deal is completed. All debt financing has been provided by J.P. Morgan, Deutsche Bank, Credit Suisse First Boston and Lehman Brothers.

TRW Automotive makes and markets automotive systems and components, such as steering, suspension, seat belts, braking, and steering. The division had $10bn in sales in 2001, down from $11bn in 2000.

The Blackstone Group acquired TRW Automotive on its own after The Carlyle Group backed out of the deal last week. The two firms were going to commit $500m each to the deal and were planning a $5bn bid, but the price fell as it became clear the business was not as attractive as originally believed, according to reports.

This is the second divestment of a TRW division as part of a streamlining of the company for its acquisition by Northrop Grumman. In October, TRW's aeronautical systems business was sold to Goodrich Corp for $1.5bn.

Last month, The Blackstone Group hired Hamilton James, the current head of CSFB's private equity and investment banking division, as vice chairman of the firm. In July, the firm closed the world's largest private equity fund, Blackstone Capital Partners IV Fund, at $6.45bn.

The Blackstone Group was founded in 1985 by Schwarzman and its chairman, Peter Peterson. The firm's six core businesses are corporate private equity, real estate private equity, corporate debt investment, marketable alternative asset management, mergers & acquisitions advisory and restructuring & reorganization advisory.

The latest fund brings the total amount of funds raised by Blackstone for corporate private equity to over $14bn. The total capital committed across the firm's entire alternative asset investing businesses is now approximately $25bn. Blackstone is also committed to increasing the range, as well as the size, of its investment focus. The firm closed a mezzanine fund on $1.14bn in 1999, and recently formed a collateralised loan obligation management business.