DETROIT — United Technologies Corp. again has put its automotive supplier arm up for sale, this time with a price as high as $2.27 billion.
UT Automotive is being shopped by investment bankers Goldman, Sachs & Co. But it may be divided in three pieces to get the premium sought by its parent, according to participants in the planned sale.
As with a previous effort to sell the company, United Technologies is prepared to take UT Automotive off the auction block if bids are seen as insufficient, two investment bankers told Automotive News, a sister publication of Plastics News.
The proposed sale is in its early stages but has attracted industry attention. Wall Street investment groups and U.S. and European automotive suppliers are expected to bid.
Plastics News ranks UT Automotive as the third-largest North American injection molder, with estimated relevant sales of $551 million.
Peter Murphy, a spokesman for the parent in Hartford, Conn., said the company does not comment on speculation regarding acquisitions or divestitures.
Industry analyst Eric Goldstein said automotive suppliers are under pressure ``to have a global reach, provide modules and to add more value — while reducing prices.''
Conglomerates are choosing to redirect their capital to where they receive a better return, said Goldstein of Bear, Stearns & Co. in New York.
For United Technologies, the biggest profit margins long have come from its core aerospace and building systems groups. UT Automotive posted a 6.1 percent margin for the first nine months of last year, up from 4.9 percent for the year-ago period, according to company reports.
United Technologies may find it difficult to find many buyers for a company as large and diverse as UT Automotive. But investment bankers do not rule out European bidders eager to gain a large North American presence. Among those mentioned are England's Mayflower Corp. plc of High Wycombe and GKN plc of Redditch.
A price of $1.84 billion for UT Automotive is in line with the average industry multiple of earnings being paid for profitable automotive suppliers, said David Strickler, an analyst with Bowles Hollowell Conner & Co. Bowles Hollowell, in Charlotte, N.C., is not involved in the sale.
But United Technologies ``wants a big price'' of about eight times earnings, said one of the investment bankers. That translates to about $2.27 billion. It is a rich but obtainable premium, Strickler said.
Getting top dollar may require splitting UTA into three parts, one of the investment bankers said.
``It will leave more potential buyers because individually the groups are more affordable,'' he said.
Most attractive is the Interior Systems Group. The group, with estimated 1997 sales of $551 million, makes headliners, instrument panels and plastic trim and is enjoying a resurgence under UT Automotive President C. Scott Greer.
``Good suppliers are like lake-front property,'' said analyst Craig Cather, president of CSM Corp., an Okemos, Mich., automotive forecasting firm. ``There are only so many left, especially interiors companies.''
He said possible bidders could include Bertrand Faure SA of Paris; Magna International Inc. of Aurora, Ontario; and Johnson Controls Inc. of Plymouth, Mich.