Bloomberg News

Delphi Drops in Debut After Pricing IPO at Low End of Range

November 17, 2011

(Updates with analyst’s comment in the fourth paragraph.)

Nov. 17 (Bloomberg) -- Delphi Automotive Plc, the former parts unit of General Motors Co., fell 3.1 percent in its trading debut after raising $530 million in an initial public offering that priced the stock at the low end of the range.

The shares, trading on the New York Stock Exchange under the symbol DLPH, dropped to $21.33. The Troy, Michigan-based company sold 24 million shares for $22 each, according to data compiled by Bloomberg, after offering them for $22 to $24 apiece.

The price range valued Delphi at a discount to other North American auto-parts makers as most of the proceeds went to the largest shareholder, Paulson & Co. The company had originally discussed a $1 billion IPO, with plans to use the funds for debt payments and working capital.

“I wouldn’t really pay attention to the market volatility,” Stan Manoukian, analyst and founder of Independent Credit Research in Agoura Hills, California. “This is a relatively small secondary offering. Delphi is a somewhat new name for investors and they still have some bad memories.”

Delphi proceeded with the IPO amid turbulence in global markets and the automobile industry, which led billionaire Wilbur Ross to delay the offering of his International Automotive Components Group until at least January. IPOs totaling $8.9 billion were canceled or postponed in the third quarter. Consumer-review site operator Angie’s List Inc. also sold shares in an IPO yesterday, raising $114 million after pricing at the high end of a proposed range.

‘Cyclical Company’

“It is impressive that they are able to get a cyclical company like Delphi public in a tough market,” said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk, Virginia, which manages about $1.8 billion. “The recent bump in the market” gave them a short window to get the deal done, he said.

Delphi has benefited from the recovery in the U.S. auto industry, highlighted by last year’s IPOs of GM and Tesla Motors Inc., the first U.S. automakers to go public in more than 50 years. Market turmoil has driven down shares of GM 41 percent this year while Ford Motor Co. has slid 39 percent.

The hedge fund led by billionaire John Paulson intended to sell more than 80 percent of the shares in the IPO, according to Delphi’s prospectus, and other existing shareholders offered the rest. The company isn’t getting any proceeds from the IPO, led by Goldman Sachs Group Inc. and JPMorgan Chase & Co.

Delphi’s Strategy

At the IPO price, Delphi has an enterprise value of about $8.5 billion, or 4.4 times earnings before interest, taxes, depreciation and amortization in the 12 months through September. As of yesterday, that compared with about 5.4 for rival Visteon Corp. and an average of 5.8 times among North American auto-parts makers, based on data compiled by Bloomberg Industries.

Delphi, which emerged from bankruptcy in 2009 and is run by Chief Executive Officer Rodney O’Neal, returned to profitability last year after cutting costs and focusing on selling fuel- injection systems and other car parts in faster-growing countries such as China.

The company expects almost half of future growth to come from developing nations, according to its regulatory filing. In 2010, Daimler AG, Ford Motor Co., GM, Peugeot SA and Volkswagen AG made up almost half Delphi’s $13.8 billion in sales, with GM accounting for the largest chunk.

Delphi now has about 101,000 workers, mostly in lower-cost countries, compared with 184,000 in 2005 when it filed for protection from creditors. Earnings in the three months ended Sept. 30 more than doubled to $266 million, while sales approached $4 billion.

--Editors: Bill Koenig, Jamie Butters

To contact the reporters on this story: Lee Spears in New York at; Mark Clothier in Southfield, Michigan at

To contact the editors responsible for this story: Jamie Butters at; Jennifer Sondag at

The Good Business Issue
blog comments powered by Disqus