Portfolio Company: International Automotive Components
Sponsor: WL Ross & Co.
Exit Possibility: IPO
Ross, speaking ahead of a speech at the Automotive News World Congress in Detroit this month, said the investment banks will tell him when the markets desire an IPO by Southfield, Michigan-based IAC.
“We don’t need the money,” he told sister news service Reuters. “It’s really a question of when we could get a reasonable valuation, but in general I think interiors are a very capital intensive business and if you’re capital intensive and growing you want to get cheap access to capital and that ultimately means public markets.”
He said it was a question of when the stock markets would be receptive.
Ross, known for consolidating out-of-favor assets in areas such as autos, said he currently has no interest in selling IAC, but he said another option to take the $4.7 billion company public would be through a “backdoor merger” where it acquires a publicly traded company.
In 2011 sources said Ross had hired Bank of America and JPMorgan Chase to help take IAC public in an IPO. The company makes auto interior parts such as door and trim systems, instrument panels, floors and headliner systems.
Ross wants IAC to continue its growth from $614 million in revenue when he started in 2006 by combining the business of the former Collins & Aikman and the interiors business of Lear and through a string of acquisitions. Lear Corp owns a stake of about 17 percent in IAC, according to an IAC spokesman.
IAC has 24,000 employees at 90 locations in 20 countries and Ross said it is buying more companies in China and looking at making additions in Africa and Russia. “There’s room for a $10 billion company in our space,” he said. “There is none right now.”
Ross said he was surprised how well U.S. consumer spending held up in December, but he expects unemployment to remain high in the near term.
Helping the environment for auto sales, however, are the rising age of U.S. cars—a record 11-plus years on average—and easier access to financing for consumers. U.S. new-car sales hit 14.4 million vehicles last year and are expected to rise to as much as 15.5 million vehicles in 2013.
He agreed, however, that the German economy was “on the brink” of a recession, and the real question was how much worse Europe would get and how long the downturn in that region would last.
Ross said one concern he has as the U.S. economy improves is IAC’s relationship with its organized labor workforce, which accepted concessions during the downturn. He expects the unions may seek greater job security as labor agreements are renegotiated. He added that IAC was not in any labor talks currently.
He also said raw material prices have “calmed down,” which was welcome as IAC had previously been hurt by rising oil prices that pressured resin costs for the company.
Ben Klayman is a Detroit-based correspondent for Reuters news service