Auto parts supplier Delphi Automotive LLP said last week that the company is buying back ownership stakes from General Motors Co. and the federal government for more than $4 billion.
Chief Financial Officer Dan Ammann said the move is part of GM’s commitment to strengthen and simplify its balance sheet. The transaction leaves the company in a position to go in for an initial public offering that, according to industry watchers could come in a year.
One analyst said the move away from GM would help distance Delphi from U.S. government involvement, which could attract some investors.
“In an IPO, it looks like they’re clear of … GM, which is still partially owned by the government,” said Jim Hall, managing director of 2953 Analytics.
Delphi recorded revenues of $13.8 billion and earned $1.4 billion before interest, taxes, depreciation and amortization in 2010. Apart from GM, it also bought back $594 million worth of shares owned by Pension Benefit Guaranty Corp. (“PBGC”).
GM will report a book gain of approximately $1.6 billion in the first quarter of 2011 related to the sale. Earlier this month, GM sold its Ally Financial Series A preferred stock for $1.0 billion in a registered public offering. The Ally transaction will result in a book gain of $0.3 billion to be recorded in the first quarter of 2011.