Category: IPO Research
Mobileye: Racing to Deliver the Driverless Car
Mobileye N.V. (NYSE: MBLY),based in Jerusalem, Israel, develops software and systems for camera-based advanced driver assistance systems (ADAS), which provide car and truck drivers with enhanced safety, and the potential for autonomous driving. Founded in 1999, Mobileye’s products were installed in over three million vehicles between 2007 and March 31, 2014.
Mobileye debuted on the NYSE on August 1, 2014 in a 35 million share IPO at $25 per share, in a transaction in which the company sold roughly 8.3 million shares, and insiders sold a head-turning 27 million. Thus, the company raised about $200 million in the IPO. The transaction was led by nine investment banks: Goldman Sachs, Morgan Stanley, Deutsche Bank Securities, Barclays, Citigroup, Wells Fargo Securities, Robert W. Baird, William Blair and Raymond James. At a recent share price of $45, the company’s market cap. is a rather astounding $9.5 billion.
Mobileye’s software and computer chips perform detailed analyses of the visual field surrounding a vehicle, with the goal of anticipating collisions with other on-road vehicles, debris, animals, cyclists, pedestrians, as well as road markings such as traffic lanes, road barriers, traffic signals, and lights. The company’s products are utilized by more than 15 car and truck OEMs, including Audi AG, BMW, Chrysler, Fiat, Ford Motor, General Motors, Honda, HKMC (a joint venture of Hyundai and Kia), as well as Jaguar, Nissan, Renault, Tesla Motors, Volvo, Mitsubishi, and others.
Within the automotive industry the race has begun to provide the world’s first driverless car, though all participants in the industry believe this will not be achieved for a number of years. Mobileye is working on developing chips that will enable hands-free driving at highway speeds, as well as traffic-intensive situations. The company is also working on country road and city traffic capabilities, which it acknowledges will require “significant algorithmic advances,” according to its IPO prospectus. All in all, these capabilities are at least several years away from commercial adoption.
Mobileye sells primarily to Tier One OEM manufacturers, not the vehicle manufacturers themselves. These Tier 1 suppliers, which comprise well over 80 percent of sales, include Magna Electronics, TRW Automotive Holdings, Autoliv, Delphi Automotive, and Bendix. These companies embed Mobileye’s products into their own systems, which are in turn sold to car and truck manufacturers. Mobileye also derives about 10 percent of sales from the automotive aftermarket, including commercial and government fleets, as well as insurance companies and telematics and GPS suppliers. With regard to customer concentration, Mobileye notes that 30 percent of sales came from three automotive OEMs supplied by Mobileye’s Tier 1 customers in 2013.
Post-IPO Mobileye has a strong balance sheet with over $345 million in cash and no debt. The company’s DSOs at the end of the September 30th quarter were 51. To see how Mobileye screens against comparable IPOs of the last several years within the hardware and systems sector, please contact Battle Road.
Annie’s IPO: Minneapolis Meets Berkeley
The most recent acquisition of a company in our Battle Road IPO Review universe occurred when General Mills (NYSE: GIS) bought Annie’s (NYSE: BNNY), a developer of natural and organic foods, with 145 products sold through 35,000 retail locations. On September 22, Annie’s rose by 36 percent, following a $46 per share all-cash offer which valued the company at $820 million, or roughly 3.2 EV/sales on 2014 projected revenue, and 40x Consensus EPS projections for 2015.
At first glance, the purchase price of Annie’s, which values the company at $5.7 million per food product, may appear to be a bit indulgent. That is, until one considers the national trend toward healthy eating, and the widespread consumer distrust of processed food, which some are linking to diabetes, heart disease, and, in extreme cases, cancer.
Annie’s, founded by Annie Withey and Andrew Martin in Connecticut in 1989, began with an organic approach to macaroni and cheese, and became successful by injecting organic ingredients into all of their products, and by building up successful distribution outside of the super market mainstream, dominated by the packaged food companies. After a series of business combinations, Annie’s received a capital infusion from Solera Capital, which moved the company’s headquarters from Boston to Berkeley.
The trend toward natural foods and healthy eating has naturally caught the attention of the packaged food giants in the US. So it was that General Mills, the 150 year-old packaged food processor founded by Cadwallader Washburn and John Crosby only a year after the conclusion of the American Civil War, and renowned for such brands as Cheerios, Green Giant, Bugles, Lucky Charms, Trix, Cocoa Puffs, Franken-Berry, Gold Medal Flower, and Bisquick, elected to make a tender offer for Annie’s. The proposed acquisition, which has already received regulatory approval, brings to a conclusion the brief public company history of Annie’s, whose IPO occurred less than 32 months ago on March 28, 2012 IPO at a price of $19 per share.