Johnson Controls Inc.’s unsolicited $1.25 billion offer for bankrupt Visteon Corp.’s interiors and electronics businesses may delay the company’s emergence from creditor protection, an analyst said.
Visteon said today in a statement that Johnson Controls, the largest publicly traded U.S. auto-parts maker, is a competitor and stands to benefit from introducing “delay and complexity” into its reorganization. The cash offer for the former Ford Motor Co. unit was made yesterday in a letter, Milwaukee-based Johnson Controls said in a separate statement.
“This creates competition for these assets in the court,” David Leiker, an analyst with Robert W. Baird, said in e-mailed comments today. “At the end of the day, the creditors want to maximize how much they get from the assets.”
Johnson Controls’ offer lacks “important information and remains highly conditional and vaguely defined,” Visteon said. The two companies have had “extensive and difficult experiences” in prior transactions, Visteon said.
“Although Visteon anticipates further dialogue with Johnson Controls, the company will continue on its path toward emerging from Chapter 11,” Visteon said.
Johnson Controls rose 32 cents, or 1.2 percent, to $28 at 3:09 p.m. in New York Stock Exchange composite trading. The shares have climbed 48 percent in the past year.
Visteon is proposing to give 95 percent of its equity to company bondholders in return for a $1.25 billion investment. The arrangement would cancel Visteon’s current stock, the company said May 7.
Visteon is scheduled to ask the judge overseeing its bankruptcy to approve the bondholders’ investment on May 24. That deal is opposed by shareholders, who say Visteon is solvent enough to pay its debts and return the company to them.
The company’s secured lenders also oppose the plan, saying it would require Visteon to pay about $100 million in unnecessary fees.
The combination of the interior and electronics business of both companies may mean revenue in China exceeding $7 billion, Johnson Controls said.
“Visteon’s interiors and electronics businesses would be an excellent strategic fit with our Automotive Experience business,” Johnson Controls Chief Executive Officer Stephen A. Roell said in the statement. “This acquisition would significantly expand our automotive interior technologies and capabilities.”
The purchase would give Johnson Controls a larger presence in China and more offerings in vehicle audio, Leiker wrote in a report today. Johnson Controls reported $28.5 billion in revenue with a net loss of $338 million in the fiscal year that ended in September. About $12 billion of the sales came from its automotive unit.
Visteon’s interiors and electronics business generated revenue of $4.1 billion in 2009 and an estimated $230 million in earnings before interest, taxes, depreciation and amortization, said Leiker, who rates Johnson Controls shares “buy.”
The offer represents less than five times the Visteon businesses’ estimated 2010 Ebitda, he said.
Johnson Controls said it has approached Van Buren Township, Michigan-based Visteon twice before about the businesses. Johnson Controls hired Wachtell, Lipton, Rosen & Katz and JPMorgan Securities to assist in a transaction.
Visteon, spun off from Ford in 2000, filed for bankruptcy in May 2009, listing assets of $4.58 billion and debt of $5.32 billion in Chapter 11 documents.
Visteon’s 7 percent bonds due in 2014 were unchanged today at 106 cents on the dollar after falling 6.2 percent yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.