Zinger Key Points
- Aptiv plans to separate its Electrical Distribution Systems business, creating two independent entities to enhance focus and growth.
- Aptiv’s separation aims for a high-growth, high-margin business, with a spin-off to shareholders expected by March 31, 2026.
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Aptiv PLC APTV shares are trading higher in the premarket session on Wednesday.
The company’s Board of Directors has approved a plan to separate its Electrical Distribution Systems (EDS) business from Aptiv, creating two independent entities.
Aptiv also reaffirmed its 2024 outlook, with a fourth-quarter earnings report scheduled for February 6, 2025. While reporting third-quarter results in October, Aptiv said it expects FY24 adjusted earnings per share in the range of $6.00-$6.30 ($6.12 estimate) and net sales of $19.60 billion-$19.90 billion ($19.68 billion estimate).
This strategic split aims to enhance operational focus, allowing each company to better serve customers and maximize shareholder value.
Kevin Clark, Aptiv’s Chairman and CEO, emphasized that the separation is part of the company’s broader transformation strategy.
“Following completion of the transaction, Aptiv will have a portfolio of advanced software and hardware technologies and highly engineered, mission-critical products that are aligned with global mega trends fueling growth in diverse end markets,” Clark said.
He explained that Aptiv will focus on advanced software and hardware technologies aligned with global mega trends, including electrification, automation, and AI.
Post-separation, Aptiv expects to become a high-growth, high-margin business with strong cash flow, targeting mid-to-high single-digit revenue growth and low-to-mid teen operating margins.
EDS, which has over 100 years of experience, will benefit from a sharper focus on designing next-generation electrical architectures for the automotive and commercial vehicle sectors. EDS expects mid-single-digit revenue growth and solid cash flow as it continues to optimize its product offerings.
The separation will be executed through a spin-off, with Aptiv shareholders receiving pro-rata shares in the new EDS entity.
The transaction is expected to be tax-free for both Aptiv and its shareholders. The separation is targeted for completion by March 31, 2026, pending customary conditions and final board approval.
Price Action: APTV shares are trading higher by 5.20% to $65.00 premarket at last check Wednesday.
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