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Visteon sheds lighting unit

by Thomas Zadvydas | Published March 12, 2012 at 4:53 PM

Auto components supplier Visteon Corp. of Van Buren Township, Mich., announced Monday, March 12, that it will sell its automotive lighting business to Indian automobile parts company Varroc Group for $92 million.

The target manufactures exterior lighting products, including front and rear lighting systems, auxiliary lamps, and related subcomponents such as projectors and electronic modules. The business generated 2011 revenue of $531 million. It employs about 4,200 people.

Visteon, led by chairman, president and CEO Donald J. Stebbins, in October hired Goldman Sachs Group Inc. and Rothschild to serve as financial advisers to explore noncore asset sales under pressure from shareholders looking for improved stock performance.

Among dissatisfied shareholders was New York hedge fund Alden Global Capital, which on May 11 nominated two new members to serve on Visteon's board. Visteon eventually ceded the board seats in August to avoid a proxy battle.

"This does support optimizing our portfolio and really focusing on our climate and electronics businesses," Visteon corporate communications director Jim Fisher said. "We've talked about optimizing our product portfolio and really positioning the company as a focused high-performance business that can really deliver maximum value for customers and shareholders."

The deal should close in the third quarter, pending regulatory clearance and other conditions.

"I think [Visteon was] sub-scale in lighting. This transaction was largely anticipated," said one analyst who declined to be named.

Visteon was once the parts unit of Ford Motor Co. before a $2.8 billion spinout in June 2000. It filed for Chapter 11 on May 28, 2009, due to declining liquidity and pending maturity of secured debt waivers at the time.

The company emerged from court protection on Oct. 1, 2010, with backing from a patchwork of big-name equity investors, including CQS (US) LLC, Deutsche Bank Securities Inc., Elliott International LP, Goldman Sachs, Monarch Master Funding Ltd., Oak Hill Advisors LP and Solus Alternative Asset Management LP.

Since coming out of bankruptcy, "they've been trying to reposition this business for the long haul," said analyst Matthew Stower of Guggenheim Securities LLC. Stower added that Visteon's shareholders could be rushing asset sales and questioned whether it has affected the company's ability to receive fair value in return.

Visteon said Nov. 30 that it's in discussions with Chinese partner Huayu Automotive Systems Co. Ltd. to potentially sell another asset. Visteon said it has signed a nonbinding memorandum of understanding setting forth basic terms of a sale of car interiors unit Yanfeng Visteon Automotive Trim Systems Co. Ltd., a joint venture between Visteon and Huayu. Terms of the potential deal were not disclosed, but Visteon said the combination would have annual sales of about $4 billion and serve more than 30 customers from over 60 facilities in 16 countries.

Varroc Group, based in Aurangabad, India, supplies components for two-wheel, three-wheel, and four-wheel passenger and commercial vehicles, manufacturing electronics, polymer, electrical and metallic parts. Varroc has 5,000 employees in 26 plants -- 20 in India, five in Europe, and one in Southeast Asia.

Rothschild advised Visteon on the deal, while Squire, Sanders & Dempsey LLP was legal counsel. Citigroup Inc. was the financial adviser to the buyer, while Robert Stebbins and Michael Brandt at Willkie Farr & Gallagher LLP was counsel to Varroc.

Varroc couldn't be reached Monday.

Visteon has a market value of about $2.7 billion. Its shares were down 37 cents, or 0.70%, to $52.74, Monday afternoon.

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