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Hedge fund becomes among largest shareholders at Visteon; big changes coming?

Dustin Walsh covers auto suppliers for Crain's Detroit Business; an affiliate of Automotive News.
UPDATED: 5/13/1 8:07 pm ET

It's been a busy month at Visteon Corp., the former Ford parts unit that emerged from 16 months of bankruptcy proceedings back in October.

On Thursday, we learned that board member William Redmond Jr. resigned in the midst of a board nominations dispute between Visteon and a shareholder.

Visteon, fearing an expensive proxy fight, came to a compromise with Cayman Islands-based Alden Global Distressed Opportunities Master Fund LP. The agreement allows the hedge fund to recommend two directors in August to sit on the supplier's board.

Today, we learned Alden is making a power play by becoming one of the supplier's largest shareholders.

On May 2, the hedge fund acquired 3.5 percent of the company, becoming one of its largest shareholders, according to an SEC filing Thursday.

Alden and its affiliates also hold 6.1 percent in non-voting shares, according to Visteon. Voting shares provide the shareholder with voting power on corporate policy matters, such as voting for board members.

It's unclear when the hedge fund or an affiliate owned shares prior to May 2 under a different name. Alden declined to comment on details.

Alden has become an activist shareholder, looking to force change at Visteon, we just don't know what changes it will attempt…yet.

"You don't buy 10 percent and put people on the board to maintain the status quo, you're seeking to implement change," said David Sowerby, portfolio manager for Loomis, Sayles & Co. LP in Bloomfield Hills. "Their goal is to unlock value by producing some type of catalyst."

Alden may try to break up the supplier's divisions at a profit. And with a host of competitors with healthy balance sheets and a lot of cash on hand, this is a possibility.

Johnson Controls Inc. last summer made a $1.25 billion unsolicited bid Visteon's interiors and electronics units during bankruptcy proceedings. 

Alden may also attempt to unseat Visteon's management team, Sowerby speculated. 

However, if there's any change in control at Visteon, its executives will walk away with millions under the company's contribution plans drafted as part of its reorganization.

For example, if CEO Donald Stebbins was terminated this year, he'd walk away with a roughly $24 million golden parachute as part of an accelerated stock vesting program.

But, that may all be worth it for Alden if it can install a CEO with its interests in mind -- which is to make as much money on its investment as possible.

Alden also owns shares of Ford Motor Co., Citigroup Inc., Gannett Co. Inc., Wells Fargo & Co., Motorola Inc., and several others.

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