TAIWAN’S Foxconn will acquire a 50 per cent stake in ZF Group’s axle system assembly unit, creating a joint venture aimed at growing automotive and supply chain opportunities, the companies said on Monday (Jul 24).

The deal, which values ZF Chassis Modules at 1 billion euros (S$1.5 billion), will allow the companies to expand the range of product offerings in the internal combustion engine and electric vehicle space, they said in a statement.

The joint venture with Foxconn is part of ZF’s strategy to grow specific business areas beyond current limits with external partners’ support, the German company’s chief executive, Holger Klein, told Reuters.

“This business can grow very quickly, but it has relatively low margins. It needs fresh capital,” which is why ZF had been looking for a partner, said Klein.

ZF wants to use the proceeds to reduce debts.

The joint venture agreement is expected to become effective within six to nine months of signing pending regulatory approvals.

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Klein, who said that he did not rule out Foxconn taking over further shares later, does not anticipate any major difficulties during the German government’s review of the transaction.

Berlin last year blocked the sale of Munich-based chip supplier Siltronic to a Taiwanese rival over tensions with China. REUTERS