Delphi Automotive PLC DLPH announced that it has closed the deal to sell its thermal business to MAHLE Behr GmbH & Co and certain of its affiliates. The terms of the sale were in line with those laid down in the agreement signed in February.
On Feb 19, 2015, Delphi Automotive inked an agreement to sell the thermal business to MAHLE for $727 million, subject to closing adjustments. The value reflects an EV/LTM EBITDA multiple of around 9.5x. Delphi Automotive received proceeds of $670 million as of that date and recorded a profit of $300 million from the divestiture. The company will use the proceeds from this transaction to finance its growth initiatives such as business acquisitions and share repurchases, with an aim to boost shareholder value.
The Thermal division of Delphi Automotive recorded revenues of $1.6 billion in 2014. The business employed around 7,500 workers in 13 global plants. The Thermal division business has been reported as discontinued operations for Delphi Automotive from first-quarter 2015.
In Feb 2015, Delphi Automotive and MAHLE entered into a separate deal under which the former will be selling its stake in Shanghai Delphi Automotive Air-Conditioning System Co., Ltd. Cash from this transaction will be additional to the proceeds from the sale of the thermal business. This deal is expected to close in 2016.
MAHLE is a leading global supplier of thermal systems. This acquisition will place MAHLE in a better position in the thermal market. The management of Delphi Automotive believes that MAHLE will ensure customer satisfaction by offering industry-leading service.
The transaction will help Delphi Automotive to focus on a high-growth product portfolio and offer stability to its employees. Further, it will expand MAHLE’s production base in Europe, North America and Asia, along with improving the competence of its product range and systems, especially air conditioning compressors.
Delphi Automotive currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the auto industry include American Axle & Manufacturing Holdings Inc. AXL, Autoliv, Inc. ALV and PACCAR Inc. PCAR, all carrying a Zacks Rank #2 (Buy).
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