Aptiv, an automotive technology provider, announced Wednesday that it has agreed to acquire software company Wind River for $4.3 billion in cash from private equity firm TPG Capital, as it aims to capitalize on a boom in expenditure by automakers to make their vehicles totally digital.
Aptiv's largest acquisition since it was spun off from Delphi Technologies in 2017, the transaction will also enable it to leverage on the shift to software-driven vehicles and diversify its income stream through Wind River's multi-sector customers.
Aptiv's shares were down 3.25% to settle at $159.70 on Tuesday.
Wind River will become a stand-alone business unit inside Aptiv's Advanced Safety and User Experience division as a result of the agreement.
The transaction, which is still subject to regulatory clearance, comes four years after TPG acquired Wind River from Intel.
The all-cash transaction will strengthen Aptiv's position in an area that is rapidly becoming the next frontier for automakers, who are investing billions of dollars to enable remote updates and add smartphone-like functionality.
Wind River creates software and cloud-based solutions for a variety of industries, including automotive, defense, aerospace, medical, industrial, and telecommunications. The company generated approximately $400 million in revenue in 2021.
Using Wind River's operating system enables Aptiv to introduce new products "more quickly and cost-effectively," Joe Massaro, Aptiv's finance head, said during an analyst call.
While Aptiv's acquisition of Wind River will focus on leveraging the company's technology to enable increasingly software-defined automotive systems, Wind River will continue to be a market leader in the aerospace and defense industries for real-time operating systems (RTOS) and intelligent edge solutions.
The automobile industry is witnessing its "biggest shift in over a century," Aptiv Chief Executive Officer Kevin Clark said in a statement. "Connected, software-defined vehicles are quickly becoming important pieces" of the broader intelligent ecosystem.
Wind River serves over 1,700 customers around the world and generated more than $400 million in revenue in 2021, with the figure expected to reach $1 billion by 2026.
While Wind River's automotive business accounts for less than 10% of revenue, company leaders believe the company's experience in other industries will be a significant asset to Aptiv as it seeks to grow business for its automotive software
Aptiv, whose customers include Volkswagen AG, Stellantis NV and General Motors Co, struggled with supply chain issues for the majority of 2021, but demand for its automated driving systems has been quite promising.
