Delphi Automotive PLC (DLPH) announced that it has signed an agreement to sell its thermal business to MAHLE GmbH. The company is expected to receive $727 million for this transaction, subject to closing adjustments. The value reflects an EV/LTM EBITDA multiple of around 9.5x.
Delphi Automotive expects the deal to close by the third quarter of 2015, subject to regulatory approvals. 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 6,700 workers in 13 global plants. The Thermal division business will be reported as discontinued operations for Delphi Automotive from first-quarter 2015.
In addition to this transaction, 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.
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, the transaction 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 carries a Zacks Rank #3 (Hold). Other well-performing stocks in the same industry include Superior Industries International, Inc. (SUP), Accuride Corp. (ACW) and Allison Transmission Holdings, Inc. (ALSN), all sporting a Zacks Rank #1 (Strong Buy).
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