The Blackstone Group floated its TRW Automotive Holdings investment on the New York Stock Exchange, sending the business off in an IPO that netted the company $675.8 million. However, the size of the offering, at 24.1 million shares, proved a bit ponderous for the auto-parts maker, which opened at $27.35 a share, and only sank deeper throughout the inaugural session, closing its debut at $27.10 a share. TRW had listed the stock at $28 a share, which was already at the low end of its initial $28 to $30 per-share range.
TRW used the proceeds from roughly 12.07 million shares sold -about half of the total offering -to repurchase an equal number of shares from Blackstone. The balance of the proceeds were put towards the repayment of debt, which after the IPO stood at $2.8 billion. Standard & Poor’s upgraded its credit rating on TRW’s debt to “BB-plus” following the floatation.
For Blackstone, the IPO comes less than one year after its acquisition of TRW. The firm acquired the company at the end of February in a deal valuing the auto-parts maker at $4.653 billion, including $210 million of assumed debt. Blackstone purchased the business from Northrop Grumman, which had just acquired TRW’s defense business and was looking to dispose of the non-core auto unit. Blackstone provided $698 million in equity to fund the transaction, and was supported by a financing arrangement consisting of roughly $3.09 billion in senior notes and a senior secured credit facility. Northrop Grumman held onto a 19.6% stake in the company.
TRW is primarily a Tier-1 supplier of automotive systems and components to the automobile manufacturing industry. The company posted approximately $1.1 billion in pro forma EBITDA on $10.4 billion in sales, during the fiscal year 2002. And for the first three quarters of fiscal 2003, the company has generated $798 million in EBITDA on sales of $8.3 billion.
In the filing, TRW outlined that it intends to spur growth through focusing on active and passive safety technologies, as well as the expansion of its technological capabilities, improvements in its operating efficiency and the pursuit of additional joint ventures and alliances. The company cited as potential risk factors the availability of cash and access to capital, the cyclical nature of the automotive industry, pricing pressures on the auto-part suppliers, and expenses for pension and other post-retirement benefits, as well as other potential hurdles.
For the IPO, Blackstone tapped Credit Suisse First Boston, Goldman Sachs and J.P. Morgan Chase as the joint bookrunners, and listed the stock under the ticker symbol “TRW.” Most speculation in the press pointed to the competition in the IPO market, as well as the large number of shares TRW offered, for the company’s glum debut. With a spate of IPOs listing in the same week, which was the busiest five days for the IPO market in more than three years, sticking out was more difficult than it has been in years. Other IPOs listed that week were the $1.7 billion offering of Assurant, a $144 million IPO of Todco, and a $78.3 million floatation of GTX Inc., among others, with 11 offerings in all. Since the IPO, TRW’s shares have dropped about three percent from its $27.35 per share offering at press time.
Sponsor: The Blackstone Group
IPO: TRW Automotive Holdings
Offering Size: 24.1 million shares
Offering Price: $28 a share
Closing Price: $27.10 a share
Underwriters: Credit Suisse First Boston, Goldman Sachs, J.P. Morgan Chase & Co
Ticker Symbol: TRW