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TRW Automotive Holdings is Adage Capital’s new position

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Adage Capital and TRW Automotive Holdings

Adage Capital added a new position in TRW Automotive Holdings Corp. (TRW) during the third quarter that ended in September 2014. The position accounted for 0.32% of the fund’s total 3Q portfolio.

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TRW Automotive Holdings overview

TRW Automotive Holdings (TRW) supplies vehicular systems, modules, and components to original equipment manufacturers and related aftermarkets globally. The firm mainly designs, manufactures, and sells active and passive safety-related products. Products often integrate electronics components and systems. The following four segments comprise the business:

  • chassis systems
  • occupant safety systems
  • electronics
  • automotive components

TRW Automotive Holdings said that 83% of its 2013 end-customer sales were made to major original equipment manufacturers.

TRW Automotive to be acquired by ZF Friedrichshafen

TRW Automotive, based in Livonia, Michigan, announced in July that it’s going to be acquired by German auto parts maker ZF Friedrichshafen AG for approximately $13.5 billion. A press release noted that the transaction will create a global leader in the automotive supplier business with 138,000 employees and pro forma combined sales of approximately 30 billion euros ($41 billion). The release went on to say that the combined entity is expected to benefit from “favorable megatrends in the automotive industry by bringing together complementary product offerings and leading technology positions that serve high-growth areas such as fuel efficiency, increased safety requirements, and autonomous driving.”

In September, TRW Automotive Holdings sold its engine valve business to Federal-Mogul Corporation for a purchase price of $385 million.

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Sales decline 1% and miss estimates

TRW Automotive said its 3Q14 sales of $4.2 billion fell 1% from the prior year period and missed estimates. The firm saw increasing demand for its safety technologies and higher vehicle production volumes in North America and China. These gains were more than offset by the negative impact related to exiting certain businesses within the company’s North American brake component and assembly operations.

GAAP (generally accepted accounting practices) net earnings of $189 million, or $1.61 per diluted share, were slightly down from $197 million, or $1.60 per diluted share, in the 2013 period. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was $434 million in the third quarter of 2014, compared to the prior-year level of $403 million.

The firm said it anticipates full-year 2014 sales of around $17.4 billion. Full-year industry production volumes are forecast to total 17.0 million units in North America and 19.9 million units in Europe. TRW Automotive expects vehicle production volumes to expand in China and remain sluggish in Brazil, where negative economic conditions may continue to prevail.

Adage Capital’s positions traded in 3Q14

Adage Capital added new positions in Shire Plc (SHPG), Mallinckrodt Plc (MNK), TRW Automotive Holdings Corp. (TRW), and Duke Energy Corp (DUK). It exited positions in AbbVie Inc (ABBV) and Kinder Morgan Inc (KMI). Notable position increases were Citigroup Inc. (C) and NiSource Inc. (NI).

The next part will highlight Adage Capital’s new position in Duke Energy Corp (DUK).

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