Bloomberg News

Delphi Open to More After Buying Supplier for $1 Billion

May 25, 2012

Delphi Automotive Plc (DLPH:US), the former parts unit of General Motors Co., said it is open to more acquisitions after announcing yesterday it has entered “exclusive talks” to acquire a unit of FCI Group from Bain Capital for about 764 million euro ($958 million).

Chief Executive Officer Rodney O’Neal had said Delphi was willing to spend as much as $1 billion on an acquisition, and yesterday he didn’t rule out further deals. He’s also looking at paying dividends, buying back shares and funding the growth of the business, he said by telephone interview. Delphi had $1.4 billion of cash on hand at the end of March.

“We’ll look at a multitude of ways to get cash and value back to the shareholders and acquisitions are just one,” O’Neal said. “That’s still possible but there is nothing currently on the radar screen. It’s possible, but unlikely.”

Delphi said the acquisition of the unit, which makes electrical connectors, should add 24 cents a share to 2013 earnings, excluding acquisition-related costs. The unit, called Motorized Vehicles Division, had revenue of 692 million euro and would become part of Delphi’s electrical and electronic architecture unit, which had revenue of $2.93 billion last year.

Acquiring the FCI Group unit would make Delphi a “strong No. 2” in what is a fragmented market for connectors, O’Neal said yesterday on a conference call with analysts and investors. Delphi said it expects savings from the acquisition of $50 million next year, $70 million in 2014 and $80 million by 2015.

“This is a rare opportunity,” O’Neal said on the call. “You don’t catch assets like this in this space.”

Back From Bankruptcy

Delphi, based in Troy, Michigan, returned to profitability in 2010 after cutting costs in bankruptcy and focusing on selling fuel-injection systems and other car parts in faster- growing countries such as China. The Asia Pacific region accounted for $2.46 billion of the company’s $16 billion in sales last year, according to a regulatory filing.

Delphi may seek companies and technologies to augment its powertrain, electronics and electrical connectors businesses, O’Neal told reporters last month, when he said the company may spend $1 billion on an acquisition.

Standard & Poor’s Ratings Services on March 16 raised its corporate credit rating on Delphi to BB+, the highest non- investment grade. Kevin Clark, Delphi’s chief financial officer, said last month it may earn an investment-grade rating by next April.

The company, registered in Gillingham, U.K., rose 2.7 percent to $28.45 at the close in New York. The shares have risen 32 percent this year.

Delphi has authorized a $300 million share buyback. As of yesterday, the company said it had repurchased 3.6 million shares for $105 million.

To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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Companies Mentioned

  • DLPH
    (Delphi Automotive PLC)
    • $69.56 USD
    • 0.09
    • 0.13%
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