Umicore Acquires Delphi's Automotive Catalyst Business for $55.6 Million

Umicore Acquires Delphi’s Automotive Catalyst Business for $55.6 Million

Specialty materials group Umicore said it has agreed to acquire Delphi Corp's automotive catalyst business for $55.6 million. Delphi will ask the U.S. Bankruptcy Court for permission for the sale because the company has been in Chapter 11 since October 2005. Under U.S. bankruptcy law, the unit must be put up for a competitive bidding auction. Umicore said it expects the auction to take place toward the end of July, and, if its bid succeeds, a deal should be concluded soon after.

From AFX News Limited

BRUSSELS — Specialty materials group Umicore said it has agreed to acquire Delphi Corp’s automotive catalyst business for $55.6 million.

Delphi will ask the U.S. Bankruptcy Court for permission for the sale because the company has been in Chapter 11 since October 2005. Under U.S. bankruptcy law, the unit must be put up for a competitive bidding auction.

Umicore said it expects the auction to take place toward the end of July, and, if its bid succeeds, a deal should be concluded soon after.

As part of the transaction, Umicore will acquire manufacturing and research facilities in Tulsa, OK; Florange, France; and Port Elizabeth, South Africa. Umicore would also acquire a complete customer book and intellectual property portfolio of more than 70 patents, as well as business activities and certain assets in China, Australia and Mexico. Existing test programs will continue to run in Bascharage, Luxemburg, and Flint, MI, under service agreements.

Umicore anticipates that the acquisition would be "somewhat earnings dilutive" in 2007 and 2008, including the effect of integration costs, but should generate earnings above the cost of capital thereafter.

"Umicore and Delphi’s automotive catalyst businesses have strong complementarities in terms of technologies and customer mix. The acquisition would give access to an extended customer base and accelerate the growth of Umicore’s catalyst business. It would also strengthen Umicore’s research, engineering and sales teams," the Belgian group said.

"The combination of R&D and process manufacturing competencies of the two organizations would provide the potential for greater innovation, a broader product offering and increased efficiency," it added.

The group estimates the integration costs as running possibly into a double-digit millions amount, but declined to be more precise. It said post-integration, there would be a convergence in profitability.

However, Umicore noted that although the acquisition would "broaden" the group’s potential, it would not materially alter the sector much.

Since Delphi was spun off from its former parent company, General Motors Corp., in 1999, Umicore said the group’s automotive catalysts business has developed a "diverse customer base" in the U.S., Europe and Asia.

In 2006, the business recorded a pro-forma operating loss of $2 million on revenues (excluding precious metal content) of $162 million, Umicore noted.

Chief executive Thomas Leysen remained confident about the company’s bid, but admitted that other groups could also submit offers.

"Clearly there is a possibility that other bidders may materialize. We will see what happens at the auction," he said.

BASF AG and Johnson Matthey are two peers — making up with Umicore, the three groups dominating the market — in position to make potential rival offers, analysts said.

Umicore also said it continues to looks for acquisition opportunities, large or small.