Delphi IPO could value company at $7.55 billion
(Reuters) - Delphi Automotive Plc indicated a price range for its initial public offering that values the former General Motors (GM.N) parts unit below levels projected six months ago when the IPO was first considered.
Delphi said in a regulatory filing on Monday that the price range for the offering would be $22 to $24 a share, establishing a value for the company at about $7.55 billion. In May, people familiar with the matter said the supplier could be worth $10 billion to $14 billion.
One possible investor said Delphi's stock could be an attractive long-term investment but would not offer the 56 percent surge that the daily deals website Groupon Inc (GRPN.O) saw on Friday.
"It's obviously not going to be as hot as Groupon, but there may be some underlying demand at reasonable valuations for this stock," said Josef Schuster, founder of iPox Schuster, a fund that specializes in investing in newly public companies.
Schuster, whose firm last year bought shares in South Korean auto parts maker Mando Corp's (060980.KS) IPO, said the global market for auto parts would grow in 2012 and 2013, especially in emerging markets, and Delphi could benefit.
However, Delphi shares may fall initially as investors link it with major customer GM, whose shares have fallen about a quarter since its IPO last fall, he said.
Delphi's offering, which would come about two years after the company emerged from bankruptcy, would raise about $554.3 million at the midpoint of the proposed price range, according to the filing. That would be far less than the $1 billion it was originally aiming for, a person familiar with the situation told Reuters last week.
The company's shares are expected to begin trading on the New York Stock Exchange on November 17, the person said.
The global auto market has shown signs of a gradual recovery, but investors remain concerned about the strength of demand in the European and North American markets.
Delphi filed for bankruptcy in 2005 after succumbing to high costs for wages and legacy benefits inherited in its spinoff from GM in 1999.
It emerged from bankruptcy four years later, with GM and hedge funds Silver Point Capital LP and Elliott Management taking a controlling stake in the company.
Earlier this year, Delphi bought back stakes held by GM and Pension Benefit Guaranty Corp for about $4.4 billion in a bid to simplify its capital structure.
Since 2005, when it was the largest U.S. auto supplier, Delphi has whittled down its business and simplified its capital structure. It exited 11 businesses and streamlined its product lines to 33 from 119, according to a filing in May when Delphi first said it would pursue an IPO.
Delphi, the No. 6 auto supplier in North America last year, also cut its global headcount by 27 percent, including temporary workers, according to the May filing. Ninety-one percent of its hourly work force is located in "low-cost countries" and about 30 percent of its hourly employees are temporary workers.
Members of Delphi's board of directors are eligible to receive a $275,000 cash bonus if Delphi's value exceeds $6 billion after an IPO, according to the May filing. However, Chief Executive Rodney O'Neal, who sits on the board, is not eligible for the bonus.
Morningstar analyst Richard Hilgert called the IPO price "compelling" as he estimated the company's fair enterprise value at $9.1 billion. "I think we'll see that fair value within the next 12 to 18 months," he said.
Delphi, which said the offering would consist of about 24.1 million shares, plans to list its shares on the New York Stock Exchange under the symbol "DLPH."
The IPO is being underwritten by 18 underwriters led by Goldman Sachs and J.P. Morgan. RBC Capital Markets no longer forms part of the group of underwriters, according to the filing.
The company itself is not selling any shares in the IPO.
The offering comprises shares from certain stockholders, including from hedge fund Paulson & Co, which is selling 20.6 million shares.
The amount of money a company says it plans to raise in its first IPO filing is used to calculate registration fees. The final size of the IPO can be different.
(Reporting by Ben Klayman in Detroit; additional reporting by Brenton Cordeiro in Bangalore; Editing by Viraj Nair, Saumyadeb Chakrabarty, Dave Zimmerman)
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