Visteon Board Said to Weigh Splitting Into Two Companies
Visteon Corp., the auto-parts maker that was once a unit of Ford Motor Co., is exploring a plan to split into two companies, one focused on electronics and the other on climate controls, people familiar with the matter said.
Visteon — which has yet to hire advisers to help with the split — is considering several moves, including selling or spinning off the electronics business, the people said, asking not to be identified discussing private matters. Any restructuring would probably not be finished this calendar year, one of the people said.
Visteon’s board of directors has concluded that the two divisions, which have little overlap in their operations, add little value operating under the same corporate umbrella, the people said. The company has shed units that don’t belong in either the climate or electronics divisions. Broken up, Visteon’s parts could be worth 25% more than the whole company’s $4.5 billion market value at the end of trading yesterday, Gabelli & Co. estimates.
“Automotive conglomerates don’t work,” said Maryann Keller, an automotive consultant who was on the board of Dollar Thrifty Automotive Group Inc. “No one wants to be a supermarket of products anymore. Everyone wants to be a bigger player in a smaller area.”
U.S. companies have announced 58 spinoffs this year, data compiled by Bloomberg show, as they look to narrow their focus.
The decision to break up — sometimes the result of pressure from activists — can push up share prices. For investors, the spinoff can offer tax advantages over an outright sale.
Earlier this month Federal Mogul Holdings Corp., which is controlled by Billionaire Carl Icahn, rose 3.5% in three days after the company said it would separate its retail replacement-parts business from its engine-parts business.
Visteon’s electronics unit — which now includes a business acquired from Johnson Controls Inc. in July — has grown faster than the company’s other business lines, with sales in the quarter through June rising 25% over two years. As part of the larger company, it’s undervalued, according to Brian Sponheimer, an analyst with Gabelli.
“At current prices, you essentially get Visteon’s electronic business for nearly free at best and well below private market value at worst,” he wrote in an e-mail.
Once Chief Executive Officer Tim Leuliette has finished merging the Johnson Controls business into the unit, Visteon will likely move ahead with splitting the company, one of the people said. Jim Fisher, a spokesman for Van Buren Township, Michigan-based Visteon, declined to comment.
The electronics business could have about $3 billion in annual revenue by the end of 2015 and be worth close to $2 billion, Sponheimer estimates. The climate business, which had about $4.9 billion in sales last year, is now part of a venture with South Korea’s Halla Climate Control Corp.
Valued separately, the two businesses could be worth as much as $129 per share by 2016, compared with Visteon’s closing price yesterday of $103.06, Sponheimer said.
One option for Visteon is to keep the electronics unit and sell its 70% stake in the climate venture. Visteon tried to acquire Halla Climate in 2012 — only to have its move rebuffed by Korea’s National Pension Service.
Selling the climate business is difficult because Halla would have to approve any sale, Keller said.
“Visteon probably can’t acquire the rest of Halla and what price Korean investors would pay for the 70% is unknown,” she said.
Visteon became an independent company in 2000 as a hodgepodge of mostly high-cost plants spread around the globe with $19 billion in annual sales. The only common trait among its many products lines was that they all relied heavily on the former parent, Ford, as a customer, and the company struggled.
Visteon was also weighed down by high-cost retiree pensions and wages that Ford had agreed to keep intact to appease the United Auto Workers which saw the spinoff an attempt to disown workers.
After auto-sales slumped in 2009, the company filed for bankruptcy protection -- emerging as a slimmed-down operation.
Leuliette, named CEO in October 2012, was part of a group of Visteon directors who favored revamping the company, which hadn’t been able to generate consistent profits.
The auto-industry veteran is no stranger to deals, having sold engine and chassis parts maker Metaldyne Corp. to Japan’s Asahi Tec Corp. in 2007 in a deal valued at about $1.2 billion.
In 2009, private-equity firm Patriarch Partners LLC bought a controlling interest in Dura Automotive Systems Inc., where Leuliette was chairman and CEO.
Last year, Visteon sold its stake in an automotive interiors joint venture to partner Huayu Automotive Systems Co. for $1.25 billion.
