Sensata Shares Rise on Debut

(Reuters) – Hopes for a recovering auto industry buoyed car parts maker Sensata Technologies Holding (ST.N) in its market debut on Thursday, sending its shares up as much as 5.6 percent.

Sensata manufactures sensors for automakers, thermal circuit breakers for aircraft, temperature controllers for electric motors, and other industrial technology. In 2009 more than half of its revenue came from the auto industry.

“One of its biggest customers right now is Ford and Ford is cranking on all cylinders,” said IPO Boutique Senior Managing Partner Scott Sweet.

Ford Motor Co’s (F.N) U.S. sales of cars and light trucks in February were 45.3 percent ahead of where they were a year ago.

“As the economy turns it’s highly likely that their upcoming quarters will be strong and their cash flow will improve,” said Sweet.

Sensata’s shares rose as much as 5.6 percent on their first day of trading on the New York Stock Exchange on after opening at their initial offering price.

The stock closed up 2.78 percent at $18.50 on Thursday after rising as high as $19.

The company sold 31.6 million shares for $18 each on Wednesday, raising about $568.8 million. It had planned to sell the shares for $18 to $20 each.

Morningstar IPO Strategist Bill Buhr said Sensata’s performance lags historic first day rises of 10 to 20 percent but said the auto industry has hit bottom and some of Sensata’s customers, like Ford, have ramped up production.

“Ford has had an absolute renaissance,” he said.

Sensata is one of the few IPOs this year to price within the expected range. The market so far has been patchy, with many companies slashing the value of their IPOs to get the deals done, postponing or canceling them.

“It’s still a challenging market,” said Scott Cutler, head of listings at NYSE Euronext. “The buyside certainly has leverage in this type of market. You’re not going to be able to force valuation on buyers right now.”

Cutler said investors are paying particular attention to Sensata because it is the biggest U.S. IPO so far this year, it is the first IPO of the year in the hot tech sector and its private equity-backers sold shares — a move that has been off-putting to investors recently.

“I think the response has been very positive,” he said.

Sensata, backed by funds associated with private equity firm Bain Capital, posted 2009 net revenue of $1.1 billion, down about 20 percent from the previous year.

During the same period, the company narrowed its net loss to $27.7 million from $134.5 million. Operating costs fell by nearly 20 percent, and losses from discontinued operations fell to $395,000 from more than $20 million.

Sensata said in its prospectus that it expected to benefit from increasing auto production and cars that rely more on computers. But it also said it would continue to have significant debt following its IPO and expected to post losses in the foreseeable future.

The underwriters were led by Morgan Stanley (MS.N), Barclays Capital (BARC.L) and Goldman Sachs & Co (GS.N). They have the option to purchase an additional 4.7 million shares.

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