Visteon Corporation has completed the sale of its approximately 70 percent ownership interest in Halla Visteon Climate Control Corp. (HVCC) to an affiliate of Hahn & Company, and Hankook Tire Co. Ltd., for approximately $3.6 billion or 52,000 KRW/share. Visteon also announced it will commence a shareholder capital return program in the second quarter of this year.
Announced in December 2014, the sale of Visteon’s ownership stake in HVCC, a global supplier of automotive thermal management products, represents an enterprise value for HVCC of approximately 10.1 times EBITDA for the 12 months ended Sept. 30, 2014. As a result of this sale, Visteon is now a technology-focused, pure-play supplier of automotive cockpit electronics and connected car solutions – one of the world’s leading providers of vehicle information and controls, audio and infotainment, and domain controllers.
“With our strong cockpit electronics portfolio, diverse customer base and unrivaled global footprint, we are focused and well-positioned to support our customers in the new era of the connected vehicle,” said Francis Scricco, Visteon Chairman of the Board. “We are also pleased to deliver meaningful returns to our shareholders as a result of the sale of HVCC – a solid business that we wish well under new ownership.”
As previously announced, Visteon expects to return $2.5 billion-$2.75 billion of cash to shareholders over the next 12 months via a series of actions including buybacks and special distributions. The first action is expected to involve a $500 million buyback in the form of an accelerated share repurchase program to be executed as soon as practicable and completed no later than Dec. 31, 2015. Due to complex U.S. tax rules relating to changes in ownership, there can be significant restrictions placed on the future utilization of existing tax attributes (e.g. net operating losses) if a change in control were deemed to occur. Due to the detrimental impact a share repurchase program has on the change in control calculation, and considering Visteon’s tax attributes exceed $1 billion, Visteon is limiting its share repurchase program to $500 million in 2015. The company will continue to review changes in its shareholder base and their implications for its capital return strategy.
The remainder of the capital return program is expected to include an action or series of actions including a special distribution in 2016. The special distribution is expected to be structured in a manner that treats the distribution primarily as a return of capital for U.S. income tax purposes. Currently, Visteon’s management, after review with the company’s outside tax advisors, expects the vast majority of the special distribution to be a return of capital to the extent of each shareholder’s basis. Management currently expects less than $250 million of the distribution will be treated as a qualified dividend. However, the company’s study is ongoing and will be affected by future variables and is thus subject to change.
After completing the capital return program, Visteon expects to be well-capitalized and well-positioned for both organic growth and value-accretive acquisitions. Advising Visteon on the transaction were Rothschild; UBS Investment Bank; and Skadden, Arps, Slate, Meagher & Flom LLP.