TI buys US car parts supplier for pounds 350m

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The Independent Online
TI GROUP, the engineering concern 5 per cent owned by American venture capitalists KKR, yesterday agreed a $570m (pounds 350m) cash bid for Walbro, an American automotive components supplier.

The deal is the biggest acquisition by TI since it acquired Doughty, the aerospace engineering company, in 1992.

Walbro, which is quoted on Nasdaq, the American hi-tech stock market, is a supplier of hi-tech components for automotive fuel delivery systems to a raft of multinational car and truck companies including Mercedes- Benz, Toyota, Nissan and Volkswagen, as well as America's big three auto giants.

Based in Auburn Hills, Michigan, just a stone's throw from the main Chrysler research centre in the heartland of the American auto industry, the firm employs 5,000 people at 28 plants worldwide. It has one UK plant on Deeside.

Walbro is believed to have been under some pressure to sell after running up debts of $388m as a result of an ambitious investment programme. The firm was valued by the market at less than $170m, making it more than 220 per cent geared.

TI is offering $20 a share to Walbro shareholders and assuming the entire debt, which it believes can be quickly refinanced, yielding a saving of $20m.

The firm specialises in advanced composite-material fuel tanks, which can be moulded into the intricate shapes the big manufacturers are now demanding in order to comply with modern environmental and efficiency standards.

TI's chief executive, Bill Laule, said that putting Walbro together with Bundy, TI's existing auto fuel lines business, will enable the group to offer the complete fuel systems that customers in the auto industry are increasingly demanding.

"We think we are buying it at the right time. They have done all the investments and they have all the customer programmes," he said.

The deal is expected to be earnings-enhancing in the first full year of TI's ownership before amortisation and integration costs of $30m to be taken this year and next. Mr Laule said that after the deal, which will be financed entirely from TI's existing cash resources, the group will still have the flexibility to fund another pounds 400m worth of deals, should the right opportunities come along.

Walbro turned over $678m last year with profits of $43m pre-tax and and net assets of $78m. It also has joint ventures with Fiat supplier Magnetti Marelli in Europe and South America and Mitsuba of Japan.