Delphi gets court approval of bid procedures for sale of global steering and halfshaft businesses

By Reshmi Basu

New York, Dec. 20 - A federal judge approved the bidding procedures for Delphi Corp.'s proposed sale of its global steering and halfshaft businesses.

In court Thursday, judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York also gave the green light to the selection of Steering Solutions Corp., an entity of private equity firm Platinum Equity, LLC, as the stalking horse bidder with a $447 million offer.

The purchase price includes $190 million in assumed liabilities and estimated restructuring costs, as well as $257 million to be provided by General Motors Corp. as part of the sale.

But not everyone was happy with the judge's ruling. Steering Holding, an affiliate of Sun Capital Partners Inc., made a competing offer for the business, but Delphi rejected that bid.

Sun Capital attorney Neil Herman of Morgan, Lewis, & Bockius LLP argued that the firm's offer was better. And furthermore, the proposed bidding protections created an unlevel playing field tipped too much in favor of Platinum.

If Steering Solutions is not the high bidder or Delphi chooses to go with an alternative proposal, Delphi will pay it a $5.5 million break-up fee, plus up to $2 million for expense reimbursement.

Herman contended that the bid protections created a "huge multi-dollar windfall" for its rival while keeping others out.

However Delphi attorney Jack Butler of Skadden, Arps, Slate, Meagher & Flom LLP countered that the company would welcome other offers.

"Sun, if they have a better transaction, will bid it," he said.

In giving the go-ahead to Platinum Equity, judge Drain noted that the firm had the backing of both the United Auto Workers union as well as former parent General Motors Corp., which therefore made it a superior deal.

The judge also added that he hoped that both GM and the unions would be receptive to any offers from Sun Capital and that by the time the auction rolled around, "this will be an apples to apples auction."

Competing bids are due on Jan. 18 and must be for at least $1 million more than the proposed purchase price, plus the amount of the assumed liabilities, the amount of the break-up fee and the $2 million expense reimbursement.

Subsequent bids at auction must be for at least $1 million more than the previous bid.

An auction will be held on Jan. 28 and the sale hearing on Feb. 21.

Delphi filed for bankruptcy on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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