Foxconn’s two-year effort to buy a stake in ZF Group’s powertrain division has stalled after due diligence revealed a steep valuation mismatch and heavier-than-expected debt, according to documents seen by Reuters.
The Taiwanese electronics giant had considered paying €1.3 billion for a stake in ZF’s Division E, which produces electric, hybrid and conventional drive systems.
But JPMorgan’s due diligence valued the unit at only €1.5 billion to €2.5 billion — far below an earlier €3.5 billion estimate — and found its equity value to be negative. A handwritten note in the JPMorgan report read, “no deal if equity value is negative.”
Division E’s net debt was nearly 90% higher than expected, reaching €4.177 billion, partly due to €944.7 million in pension liabilities, the document showed. The findings prompted Foxconn to halt the deal in September, shortly before ZF scrapped its plan to spin off the division.
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“Foxconn’s pursuit stalled after the due diligence findings revealed a significant difference between valuation expectations and the actual financial state of the business,” a ZF source told Reuters.
Despite the setback, ZF and Foxconn remain in talks about potential product partnerships, while Foxconn continues to seek new EV opportunities in Asia.
