Archive for the ‘Vertical: Industrials’ Category

Bain’s Sensata Could Spark $600mm IPO

Monday, March 8th, 2010

Bain Capital is offering to IPO Sensata Technologies for $632 million, 3x the original investment.  Interestingly enough, Sensata has been a money losing company every year since the investment.  Sensata’s revenue fell 20% last year and interest obligations were $151 million.  Bain acquired Sensata for $3 billion in a leveraged buyout in 1984.  The PE firm used $2.1 billion in debt and $985 million in equity to fund the buyout.

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Sensata manufacturers sensors for Ford Motor Co. and controls for Samsung.  It plans to offer 31.5 million shares at about $20 each, an 18% stake.  It will receive about 83% of the proceeds of the IPO before fees and expenses, $352 million of which will be used to pay down debt.  This would bring down down to $1.94 billion and increase cash to $232.6  million.  About $22.1 million in fees will go to Bain & Co.

This will bring Sensata’s Enterprise Value (BEV) to $4.96 billion or 13.5x EBITDA of $367 million.  The multiple is 66% higher than companies in the same industry (instruments & controls).  Its next largest competitor is the Japanese Denso Corp., which trades at 10.4x EBITDA.

This will be a very difficult IPO to pull through, after Blackstone cut its IPO for Graham Packaging by 55% a few weeks ago.

For more information, check out the source: Bloomberg

For more information, check out Sensata on the web

GM Delays European Restructuring

Wednesday, December 23rd, 2009

opel_logo

GM’s European restructuring plan with Opel and Vauxhall will now be delayed until 1Q 2010.  Nick Reilly, CEO of GM Europe, released the news last week.  He admitted that “While it is indeed exciting to see that things are coming together, bear in mind this is going to be one of the largest, most complex industrial reorganizations in European manufacturing in years.”  Thousands of European employee pay packages will be affected by the restructuring.  Last month, GM canceled the sale of a majority in Opel and Vauxhall to a consortium of Russian lender Sberbank and Canadian auto parts manufacturers Magna International, Inc.

GM has indicated it wants some 2.7 billion euros (3.9 billion dollars) in state aid from the various EU countries where it has factories in order to turn the carmaker around. Opel employs around 50,000 people in Europe, half of whom are in Germany.

For more information, refer to GM’s website…

Selling Volvo: Tough Times for Ford

Wednesday, December 23rd, 2009

volvo_logo2006_lg

Last year Ford put Volvo up for sale, a premier U.S. auto brand known for both its quality and dependability.  The sale was necessary to help Ford raise enough capital to pay down upcoming debt.  The attempted sale was part of a larger strategy to divest of non-core businesses (generating large and lucrative fees for investment bankers) and streamline operations.  At the same time, GM announced that it is abandoning its Swedish Saab unit, after selling some of its assets and intellectual property to another Chinese automaker, Beijing Automotives.  Construction machinery manufacturer Sichuan Tengzhong Heavy Industrial Machinery Corp. also acquired GM’s Hummer Brand this year.

Geely, a prominent Chinese automaker was named the preferred bidder for the franchise in November of 2009.  The deal is expected to close in the first half of 2010.  If the deal is completed, it would be the largest deal ever completed by a Chinese automotive firm.  Geely is rumored to be offering  between $1.8 and $2.3 billion for the firm, which is less than 30% of what Ford paid for Volvo in 1999, $6.45 billion.  The deal should help Geely break into the Western market, a possible turning point for Chinese auto manufacturers.  Already, Chinese annualized auto sales for 2009 have surpassed those in the United States.

The largest obstacle in the deal negotiations is disagreement about how to deal with intellectual property rights and controlling Geely’s use of U.S. technology and safety equipment.  Ford and Volvo have shared technology for over a decade and will continue to share IP in the future.  Much of Volvo’s production is rumored to be moving to China, while development and research will remain in Sweden.  One large question auto analysts have is whether or not Volvo can remain a leader in auto safety and environmental protection after the acquisition.  The Chinese have been looking to develop safety technology for years.  Geely is also looking for $1 billion in financing from the Chinese government before the transaction can get approval.

While losing Volvo could damage Ford’s long term growth potential, Ford itself has made a very impressive turnaround, recently making a $1 billion profit for the first time in years.

The first Volvo was manufactured in 1927.  Today the company employees 20,000 employees worldwide.  In 2008, sales fell by 18.3% to 374,297 units.

Geely was founded in 1986 and started as a refrigerator parts supplier.  It currently employees 12,000 and has an auto production capacity of 300,000 cars per year.  It is China’s largest automaker and is led by its charismatic founder Li Shu Fu, the equivalent of the Chinese Henry Ford.

~IS

For more information, please visit BBC news…

For more information, please visit CBC news…

Can you read Mandarin? Please visit Geely’s website…

International Paper (IP) issues $750 million offering

Sunday, December 6th, 2009

International Paper

International Paper issued $750 million in senior unsecured notes this week, due 2039. The proceeds will be applied to pay down debt for general corporate purposes.

Many companies, such as International Paper, are facing approaching deadlines to pay down debt they cannot afford.  Our current recessionary climate has forced companies that have undergone losses in profit and free cash flow to tap further into the debt markets in order to refinance their upcoming debt obligations.

Book managers include: B of A, Deutsche Bank, BNP Paribas, Citigroup, JPMorgan, Chase, RBS, UBS, and Wells Fargo.

International Paper is a global paper and packaging company providing products such as uncoated paper and industrial/commercial packaging.

In recent news, analysts at Goldman have predicted a trend for the use of cardboard packaging over plastic.  Goldman targets the price of cardboard to reach $50/ton March of next year and has placed International Paper on its “Conviction Buy” list.  This $50 estimate is $10 higher than previous estimates and has been in response to a rise in cardboard demand.

Consistent with these views, IP topped Q2 projected EPS by $0.20, and Q3 EPS by $0.13.

Borrower: International Paper Co.
Amt: $750 M, Notes Coupon: 7.3%
Pay Freq: Semi-Ann Issue Price: 99.741%
Moody’s BAA3 S&P Triple B
Maturity: 11/15/2039 Spread: 312.5 BPS over treasury
Yield: 7.322% Make-whole Call: 50 BPS

~Amit

Caterpillar to buy South Korean Manufacturer

Sunday, December 6th, 2009

054_caterpillar

Caterpillar has entered an agreement to make a 100% stock acquisition of JCS, a subsidiary of Jinsung T.E.C., by January of next year.  The$36.1 million deal will add to Caterpillar’s presence in the South Asia market.

Caterpillar already has plants in China, Indonesia, and India; and the purchase of JCS will be Caterpillar’s first factory in South Korea.   Although Caterpillar has been hit hard by the recession, laying off 22,000 employees last year, the mining/construction equipment market in South Korea seems promising as Caterpillar’s 3rd quarter sales decline was most resilient in this region.  Global sales for Caterpillar were down a whopping 50% for 3-months ending in October.

This partnership shows vital signs of a growth in South and East Asia.  With the industrial boom of China and India, Caterpillar has acquired a strategic position to foster industrial expansion.

Caterpillar is a manufacturer of construction/mining equipment, diesel/natural gas engines, and industrial gas turbines.  Jinsung T.E.C. is a designer and manufacturer of heavy equipment and spare parts.

~Amit