By: Dustin Walsh
September 20, 2012
DETROIT (Sept. 20, 8:35 a.m. ET) — Visteon Corp. is in discussions to sell its interiors business, but “there’s no gun to our head” to sell quickly, the U.S. auto parts supplier’s top executive said on Wednesday.
“We know the business will be worth more when Europe starts to rebound,” Visteon’s interim CEO Tim Leuliette said during an investor presentation. “If someone wants to pay us now for that kind of value, we’re willing to accept that. In the meantime, we’re running the business.”
It will take the European auto industry another 18 months to “get legs,” Leuliette said.
Visteon plans to sell its climate business into its Halla Climate Control Corp. joint venture for cash, the company said in a regulatory filing ahead of an investor call today.
In slides made available from the presentation, Visteon says the transaction will achieve its long-term objective of consolidating its climate operations into one company. The move will improve how the business interacts with global customers and increases corporate liquidity, the presentation says.
Halla will become the No. 2 player in the global automotive climate business, the company says.
Visteon would continue to own 70 percent of the Halla joint venture.
“Visteon and our customers have long seen the benefits of consolidating Visteon’s climate operations,” Visteon spokesman Jim Fisher said in an e-mail. “This is the most viable path to merging those businesses and creating a world-class climate organization.”
The filing also indicated the supplier is also looking to sell its Chinese joint venture Yanfeng Visteon Automotive Trim Systems Co. Ltd. “over time…and at right value.” The joint venture is between Visteon and Huayu Automotive Systems Co. — a subsidiary of China’s largest automaker, government-owned Shanghai Automotive Industry Corp.
The moves end speculation that the supplier would dissolve after former CEO Don Stebbins, who opposed a company breakup, left the company last month.
For months, analysts have speculated Visteon would, and should, make its biggest play to acquire the remaining shares of its Korean joint venture Halla. Visteon owns 70 percent of the joint venture. On July 4, Visteon said it planned to offer $805 million to acquire the remaining 30 percent stake in Halla.
But it also announced its deal to sell its remaining interiors business into Yanfeng had fallen apart. Visteon’s interiors business generated $2.16 billion in revenue in 2010.
On July 23, the Halla deal was rejected after Korea’s National Pension Service, which holds an 8.1 percent stake in Halla, rejected Visteon’s offer.
“Considering the corporate value and future growth prospects of Halla Climate, we believe not participating in the tender offer would be better for long-term returns,” NPS said in a statement.
South Korea’s Mando Corp. continues to say it is pursuing Visteon’s stake in Halla and is establishing a Chinese holding company listed on the Hong Kong Stock Exchange to do so.
Halla Climate and the remainder of Visteon’s climate control business are worth roughly $2.1 billion, according to an Aug. 30 JPMorgan Chase analyst note.
Mando, a large suppler to Hyundai Motor Co., is a subsidiary of the Halla Group, which lost the climate control business when it entered bankruptcy in 1997.
Speculators believe a play by Mando is to put Halla Group back together. Mando is reportedly run by a cousin of Hyundai Chairman Chung Ching Mong-koo.
In February, Visteon sold its lighting unit to India-based Varroc Group for $92 million.
It also sold and leased back space at its suburban Detroit headquarters in April in an $81.1 million sale to New York real estate firm Sovereign Partners LLC. The 889,000-square-foot campus was built in 2004 at the cost of $300 million.
Visteon closed its second quarter on June 30 with net income of $75 million, or $1.40 per share, after losses of $32 million and $26 million the quarters prior.
The supplier also announced today it would offer lump sum buyouts to a 10,000 former U.S. employees who have vested defined pension benefits. Visteon is not offering buyouts to its current 900 U.S. employees, said Jim Fisher, director of corporate communications.
Visteon has nearly 20,000 participants in its U.S. pension plan.
In another move on Tuesday, Visteon amended its bylaws to allow its board the authority to appoint a nonexecutive board chairman. Stebbins’ replacement, Leuliette, interim CEO and chairman, is expected to become the permanent CEO, Bloomberg reported.