Visteon sells Chinese joint venture stake for $1.2bn

October 2013 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Visteon Corporation announced on 13 August that it had entered into an agreement with joint venture partner Huayu Automotive Systems Company Ltd (HASCO) to sell its 50 percent stake in Chinese manufacturer Yanfeng Visteon Automotive Trim Systems Company Limited (YFV). The Shanghai-based YFV specialises in automotive interiors and seating, and posted revenues of around $7.2bn in 2012.

The deal will see Visteon sell its direct interest in a number of other related joint ventures to its partner HASCO, which is majority owned by carmaker SAIC Corp, China’s largest carmaker by sales. Under the terms of the deal Visteon will acquire a majority control stake of Yanfeng Visteon Automotive Electronics Inc (YFVE) from HASCO for around $300m. According to a statement released by Visteon, the total value of the two transactions is believed to be around $1.5bn.

Despite the deal to acquire the majority stake in YFVE, the sale of YFV will see Visteon endure a reduction of EBITDA in the $100m range.

The deals are subject to customary antitrust and regulatory approvals and are due to be closed in multiple stages, the majority of which will be completed before the end of the year. The deals, according to Visteon, will be fully and substantially completed by June 2015. Visteon anticipates that the company will receive around 90 percent of the proceeds of the sale around the time of the initial closing. Visteon also noted that it will be increasing its share buyback program by $875m to $1bn over the next two years. Including repurchases completed since November 2012. This would increase the company’s completed share repurchases to around $1.175bn.

According to Visteon, the company will receive cash payments of approximately $1.25bn for the sale of its stake in YFV and other related assets. “These transactions support our focus on our core climate and electronics businesses and will bring significant benefits to Visteon, our customers and our shareholders,” said Timothy Leuliette, president and chief executive of the firm. “Furthermore, these transactions will strengthen our global electronics position by consolidating the majority of YFVE and its high-growth customer order book,” he added.

Following the company’s exit from bankruptcy in 2010, Visteon, which was spun off from the Ford Motor Company in 2000, began the process of realigning its business in order to increase its presence in the lucrative Asian market. Currently, the company has corporate offices in Michigan, Shanghai and Chelmsford, UK and currently operates in 29 different countries. Visteon employs around 55,000 people across its various locations.

In order to help facilitate the company’s shift of focus to Asia, in 2012 Visteon announced that it was looking to divest a number of its lower margin units. The company planned to reorganise its climate control unit, sell its interiors division and consider options for its electronics business. However these plans have now been abandoned. Detroit-based Visteon is refocusing its attention on what it now considers to be its core businesses of electronics and climate control devices. According to data released by Visteon, the company’s electronics and climate control units are industry leaders which have both recently posted above average growth.

In trading immediately following the sale announcement, shares in Visteon rose 6.65 percent to $73.61 – the firm’s biggest one day increase since 1 November 2012. Visteon’s share price has increased 37 percent throughout 2013.

Reacting to the announcement, credit ratings agency Moody’s stated that it views the sale as a credit negative development, although it will not impact Visteon’s B1 Corporate Family Rating.

Richard Summerfield