The stage is set for Visteon Corp. to ship its electronics business over the Great Wall and expand its role in Korea.
Visteon's transformation from a Ford parts supplier to a predominantly Asian company is now in full motion.
Over the past two years, the supplier eeked out of Chapter 11, narrowly avoided a proxy battle with a hedge fund investor, surrendered two seats on its board and is now in the process of radically reshaping its business.
Last month, Visteon announced a pending agreement to consolidate its interiors business into its joint venture with Yanfeng Visteon Automotive Trim Systems Co., a Chinese joint venture of Visteon and Huayu Automotive Systems Co.
Huayu Automotive is a subsidiary of China's largest automobile maker, government-owned Shanghai Automotive Industry Corp.
Analysts at J.P. Morgan believe (and I agree) Visteon will also consolidate its global electronics business into Yanfeng in 2012 in a move to sell its 50 percent stake to SAIC.
Visteon's interiors business generated $2.2 billion in revenue last year and its electronics generated $2.1 billion in revenue.
A purchase by China's SAIC would give the conglomerate a stronger position in Europe and a hand in South America.
Expect the electronics deal to happen in the next six months, J.P. Morgan Analyst Himanshu Patel wrote last week.
However, the rumor mill is churning and there are whispers that Visteon and SAIC are already squabbling over the value of its interiors business, which could slow down any new deals next year.
The speculation for months has Visteon making a play to acquire the remaining 30 percent stake in its Korean climate (HVAC) business in the future.
Visteon is the second-largest provider of climate-control systems behind Toyota-affiliated Denso Corp. Visteon said it intends to increase its 12 percent market share of the $32 billion market to 14 percent by 2014.
J.P. Morgan estimates the remaining Halla stake is worth $800 million. So it's no surprise that Visteon is seeking to raise cash/debt to fund the purchase.
The supplier registered what is known as a mixed shelf offering with the U.S. Securities and Exchange Commission last month. The move essentially allows the company to sell stock or take on debt as it sees fit.
And Visteon is also trying to unload its 880,000-square-foot headquarters in suburban Detroit -- valued at $80 million.
It's unclear whether this is simply a cash-raising move or whether the supplier eventually has plans to vacate North America for greener pastures in Asia. More than 55 percent of its business is done in Asia as each year it decreases market share in North America.
Either way, the former Ford parts story is coming to a head and it'll likely end 6,600 miles from where it began.
