Delphi to Buy HellermannTyton to Expand in Vehicle Connectivity
By Bloomberg News
(Bloomberg) -- Delphi Automotive Plc, the former car-parts unit of General Motors Co., agreed to buy cabling-gear maker HellermannTyton Group Plc for 1.07 billion pounds ($1.7 billion) among a set of acquisitions to expand in vehicle connectivity.
Delphi said the purchase will help it capitalize on growing demand for cars that connect to mobile phones and other devices. Rupert Stadler, chief executive officer of Audi AG, the world¯¯¯s second-biggest luxury-car maker, said Thursday that digital services will have the most impact on the auto industry¯¯¯s technology development in coming years.
¯¯¯Delphi continues to be focused on the car of the future,¯¯¯ said Chris McNally, an analyst at Evercore ISI in London who recommends buying the shares. ¯¯¯It¯¯¯s leading this charge into the connected-cars space.¯¯¯
HellermannTyton stockholders will get 480 pence a share in cash, Delphi said in a statement Thursday. The price is 45 percent above Wednesday¯¯¯s close for the Crawley, England-based manufacturer of ties, insulation and protection systems for automotive cables.
Kevin Clark, Delphi¯¯¯s CEO, said on a conference call that ¯¯¯the opportunity is really big for our connector business to expand outside the auto industry. The capability of HellermannTyton and its strength of sales give us a great opportunity to sell more of our connector products.¯¯¯
The other deals announced Thursday include the purchase of automated-driving technology producer Ottomatika. Delphi also invested in Quanergy, a company that develops light detection and ranging scanners that let cars locate objects and generate digital maps, and bought a minority stake in Tula Technology, which makes software to boots fuel efficiency and cut emissions.
Delphi agreed to sell its reception-systems business, which consists of automotive antennas and in-vehicle TV tuners, to Chinese automotive supplier Northeast Industries Group Corp. Delphi expects to complete the sale in the third quarter, subject to regulatory approval.
Financial terms weren¯¯¯t disclosed for any of the deals other than HellermannTyton. Delphi, which has its headquarters in Gillingham, England, and is run from the Detroit suburb of Troy, Michigan, said it plans to complete the HellermannTyton deal late in the fourth quarter.
HellermannTyton surged 42 percent to 472.2 pence as of 3:21 p.m. in London. The company traces its roots to German and U.K. manufacturers founded in the 1930s. Doughty Hanson & Co., a U.K. private-equity firm, bought HellermannTyton in 2006, took it public in 2013 and sold its remaining stake last year.
Delphi on Thursday also reported second-quarter earnings of $1.34 a share excluding some items, matching the average of 18 analyst estimates compiled by Bloomberg. Revenue was $3.86 billion, missing the $3.9 billion estimate.
The company¯¯¯s shares fell 1.3 percent to $77.40 at 10:36 a.m. in New York. The stock had risen 7.8 percent this year through Wednesday, as the Standard & Poor¯¯¯s 500 Index gained 2.4 percent.
Bankers from Goldman Sachs Group Inc. and JPMorgan Chase & Co. advised HellermannTyton on the sale, while Barclays Plc advised Delphi.
Including net debt, the deal values HellermannTyton at about 14.7 times last year¯¯¯s earnings before interest, tax, depreciation and amortization, the companies said. Buyers paid a median multiple of 8 times Ebitda for electrical-components companies over the past five years, according to data compiled by Bloomberg.
While the purchase is ¯¯¯not cheap,¯¯¯ it¯¯¯s in line with recent profit multiples in deals such as Magna International Inc.¯¯¯s planned 1.75 billion-euro acquisition of German transmissions maker Getrag and BorgWarner Inc.¯¯¯s $951 million bid for hybrid-motor manufacturer Remy International Inc., Evercore¯¯¯s McNally said.
Based on Ebitda estimates for this year and next, the valuation multiple for the Delphi-HellermannTyton transaction would be about 8.5 to 9.1 times earnings, McNally said.
--With assistance from Patrick Ralph in New York.
To contact the reporters on this story: Phil Serafino in Paris at [email protected]; Elisabeth Behrmann in Munich at [email protected] To contact the editors responsible for this story: Chris Reiter at [email protected] John Lear, Jamie Butters
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