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Delphi- IPO chatter
Wednesday, July 21, 2010
Tags: Automotive news
Delphi begins sounding out banks on IPO - sources
U.S. auto parts maker Delphi has begun sounding out investment banks about the prospect of an initial public offering that would mark its return as a listed company as early as next year, according to three people familiar with those early-stage discussions. The timing of an IPO for privately held Delphi, which emerged from a four-year bankruptcy in October, remains subject to a number of uncertainties, including the strength of the equity markets, the sources said. A pitch to potential investors has not begun and meetings between Delphi representatives led by Chief Executive Rodney O'Neal and investment bankers who might lead an IPO will not begin for weeks, they said. In addition, a stock offering for Delphi, once a unit of General Motors Co [GM.UL], will have to be timed to avoid a conflict with the much larger GM IPO that could come later this year, according to the sources, who asked not to be named because the discussions remain informal and confidential. Delphi declined to comment, saying decisions on any stock offering would be made by the company's board and investors.
Last year, with U.S. auto sales at their lowest level since the early 1980s, Federal Mogul had considered a bid for Delphi as low as $2 billion, people involved in consideration of that offer said at the time.
Delphi's reliance on GM, which carved it out through a 1999 IPO, has also been sharply reduced by its restructuring. GM once accounted for 85 percent of Delphi's revenue. By the first quarter, the top U.S. automaker, which went through its own bankruptcy in 2009, represented just 20 percent of Delphi's sales.
Delphi also used bankruptcy to sharpen its focus on higher-margin product lines centered on electronic controls for vehicles and engine systems, safety-related components and on-board entertainment systems. The slow-growing North American vehicle market, which had accounted for 68 percent of Delphi's sales in 2005, represented just 32 percent of Delphi's 2009 sales. At the same time, Delphi's exposure to Asian markets, led by China, has almost tripled from 6 percent of sales in 2005 to 17 percent last year.
O'Neal said in April Delphi was looking for acquisitions in China and expected to outpace revenue growth in that market, now the world's largest market for vehicles ahead of the United States.