Nov. 7 (Bloomberg) -- Delphi Automotive Plc will sell as much as $578 million in shares in an initial public offering that would value the former parts unit of General Motors Co. at as much as $7.88 billion.
Delphi is offering the shares at $22 to $24 apiece, and is seeking to sell 24.1 million ordinary shares, according to a filing with the Securities and Exchange Commission. John Paulson’s hedge fund Paulson & Co. is seeking to sell 20.6 million shares, the largest stake being offered in the company. Delphi will receive none of the proceeds from the offering.
Delphi is moving ahead with its IPO amid the turbulence in global markets and the automobile industry that caused billionaire Wilbur Ross in September 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.
“It’s a good sign that most of the stakeholders are willing to wait it out for better opportunities down the road,” said David Kudla, chief executive officer of Mainstay Capital Management in Grand Blanc, Michigan. “There’s been a marked turnaround in the domestic auto industry the past few years, but this is a cyclical industry and a fragile economic recovery.”
Delphi, based in Troy, Michigan, plans to begin marketing to investors this week, two people familiar with the sale said earlier. The offering is scheduled for Nov. 16 with trading to begin Nov. 17, Bloomberg data show. The company, registered in Gillingham, U.K., had planned to sell more than $1 billion of shares, a person with knowledge of the offering said in May.
The company will have 328.2 million shares outstanding after the offering, according to the filing. At $23 a share, the midpoint of the offering range, Delphi would be worth about $7.55 billion.
Underwriters also have the option to buy as many as 3.61 million additional shares held by Paulson at the IPO price, the filing said.
The average price paid by investors who converted debt to equity during the bankruptcy was 67 cents a share, according to the filing.
Delphi, once the largest U.S. auto-parts supplier, exited bankruptcy in October 2009. Delphi has since become more profitable, reduced its dependence on its former parent and expanded in fast-growing emerging markets.
The company 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 since driven down shares of GM 36 percent this year through Nov. 4 while Ford Motor Co. has slid 33 percent.
Delphi, which seeks to trade under the symbol “DLPH,” left bankruptcy with four classes of shares. It bought back stakes from GM and the Pension Benefit Guaranty Corp. in March. Lenders including private-equity firms Elliott Management Corp., Paulson and Silver Point Capital LP bought most of the original Delphi and still hold a controlling interest.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading the offering.
The maker of fuel-injection systems and other parts said profit in the three months that ended Sept. 30 more than doubled to $266 million from a year earlier as it lowered costs. Selling, general and administrative expenses as a percent of sales fell to 5.65 percent in the quarter, from 6.26 percent a year earlier, Delphi said in a filing last week.
Revenue climbed 19 percent to $3.93 billion in the third quarter. Delphi reported profit of $631 million last year on revenue of $13.8 billion. Sales this year will be $14.5 billion to $15 billion, the company said May 10. The company has 91 percent of its hourly workers in low-cost countries.
In 2004, purchases by GM accounted for 54 percent of Delphi’s $28.6 billion revenue. No single customer accounts for more than 21 percent of Delphi’s sales now, the company said in an April presentation.
To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at firstname.lastname@example.org
To contact the editor responsible for this story: Jamie Butters at email@example.com