Hellermanntyton Group PLC Jumps Over 40% On Offer From Delphi Automotive Plc

Hellermanntyton Group PLC (LON: HTY) surges after a buyout offer from Delphi Automotive Plc (NYSE:DLPH).

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Hellermanntyton (LSE: HTY) — producer of ties, insulation and protection systems for cables in cars — is surging this morning after Delphi Automotive agreed to buy the group for £1.07bn. 

Hellermanntyton’s shareholders will receive 480p per share in cash according to Delphi Automotive’s press release on the matter, a 45% premium to yesterday’s closing price of 330p. 

Delphi Automotive used to be the auto-parts unit of US automotive giant, General Motors. Now, the group is seeking to capitalise on the increasing demand for cars that connect to electronic devices. Indeed, alone with Hellermanntyton, which will supply the cables for Delphi Automotive’s new ventures, the group has also acquired Ottomatika, a maker of automated-driving software and Quanergy, a company that develops technology that enables cars to detect objects. 

Additionally, Delphi Automotive has made a minority investment in Tula Technology, a maker of engine-control software. Hellermanntyton is anther key part of Delphi Automotive’s plan to dominate the market for connected vehicles.

Commenting on the deal, HellermannTyton’s chairman David Newlands said:

“Delphi’s significant global capabilities in vehicle technologies will provide HellermannTyton with a strong platform to further innovate, grow and better serve its customers. The combination will ensure HellermannTyton continues to lead the way in the provision of cable management solutions.”

The CEO of Delphi Automotive commented: 

“We are pleased to have reached this agreement with HellermannTyton, which will uniquely position Delphi to meet customer demand for customised cable management solutions and capitalise on additional growth opportunities in electrical architecture content.”

No competition 

Delphi Automotive plans to complete the deal to buy Hellermanntyton during the fourth quarter of this year. It’s unlikely that another buyer will emerge to outbid the US auto-parts producer before management can seal the deal. 

Including debt, Delphi Automotive’s offer for Hellermanntyon values the company at 14.7 times last year’s earnings before interest, tax, depreciation and amortization, which is relatively expensive. The wider machinery, equipment & components industry trades at a multiple of around 9.5 times EBITDA. Over the past five years, buyers have paid an average of 8 times EBITDA for components companies. 

Nevertheless, for a company like Delphi Automotive, which has a clear-cut strategy to capitalise on the rapidly growing connected car market, it is worth paying a premium to acquire Hellermanntyon.

You see, due to the increasing consumer demand for smartphone features in vehicles and the growing number of telematics devices required by insurers, governments and data analysis firms, the size of the connected car market is expected to explode during the next five years. Specifically, by 2020 the connected car market is expected to be worth $46.7bn after growing at an annual clip of 10.7% between 2015 and 2020. 

Delphi Automotive’s integrated offering should allow it to grab a large share of this market. Moreover, thanks to the group’s economies of scale, Delphi Automotive should be able to undercut many of its peers offering the same services and achieve abnormal profit margins. 

So, if you’re looking for a play on the rapid growth of the global connected car market, Delphi Automotive could be the best pick. 

As it’s unlikely that another bidder for Hellermanntyton will appear any time soon, I think the company’s shareholders should take the cash from Delphi Automotive and run. 

Other opportunities 

There are plenty of other opportunities out there to replace Hellermanntyton in your portfolio. Here at the Motley Fool, we’re always on the look out for the market’s best deals, hidden gems and contrarian plays. 

But there’s more to being a successful investor than just uncovering a few undiscovered gems. It takes careful planning and a well-designed portfolio to help you ride out market volatility and build wealth for the long term. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »