Visteon Said to Near Sale of Lighting Unit to Varroc Grou

Visteon Corp (VC)., the auto-parts maker shopping two of its four units, is in talks with India’s Varroc Group about a sale of its lighting unit, three people familiar with the sales process said.

A deal may come as early as the end of the month, two of the people said, and the discussions could break down. The unit, Visteon’s smallest, may fetch $75 million to $100 million, the people said. Its net worth is $150 million, so Visteon would have to take a noncash writedown related to the sale, said the people, who declined to be identified because the talks are private.

The negotiations are part of management’s plan for Visteon, which exited a 16-month bankruptcy in 2010, to pare lower-margin revenue in interiors and lighting to focus on faster-growing operations in Asia, five people familiar with the sales process said in October.

Varroc is an Aurangabad, India-based supplier of parts for passenger and commercial vehicles and motorcycles. Its customers include Honda Motor Co., Yamaha Motor Co., Fiat SpA (F), General Motors Co. (GM), Caterpillar Inc. and Visteon, according to its website.

Visteon’s lighting unit, which had $456 million in consolidated revenue in 2010, is the sixth-largest in a $9.5 billion market. About 81 percent of the revenue comes from North America and Europe, the company said in a July presentation. The unit’s gross margin, which measures gross profit as a percentage of revenue, is 2.6 percent, according to the presentation.

Interiors Deal

Jim Fisher, a spokesman for Visteon, declined to comment on the company’s plans. Tarang Jain, managing director of Varroc, reached on his cellphone, didn’t provide a comment.

Visteon began simplifying its corporate structure in November when it signed a nonbinding memorandum of understanding to sell most of its interiors unit to Yanfeng Visteon, the Chinese joint venture with SAIC Motor Corp. (600104) SAIC has right of first refusal on the sale of Visteon’s stake, two of the five people said in October.

Rothschild is representing Visteon in its effort to sell the two divisions, the people said in October. Chief Executive Officer Don Stebbins hired Goldman Sachs Group Inc. (GS) and Rothschild for advice for a strategic review, the company said Oct. 17.

Independent Directors

The company rose 2.3 percent to $55.43 at the close in New York. Visteon, which peaked at $75.75 in February 2011, gained 11 percent this year.

Independent board members such as Harry Wilson and Tim Leuliette pressed Stebbins to interview banks such as Goldman, JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) to help streamline a company with most of its value in joint ventures or stakes in overseas businesses, two people familiar with the process said in October.

Visteon, based in Van Buren Township, Michigan, also plans to buy the remaining 30 percent of Halla Climate Control Corp. (018880), a publicly traded Daejeon, South Korea-based maker of vehicle air conditioners and heaters, the five people said in October.

The company’s market capitalization, $2.86 billion, has been less than the value of its stakes in Halla and Shanghai- based Yanfeng Visteon Automotive Trim Systems Co., the venture with SAIC, according to data compiled by Bloomberg.

Ford Spinoff

Visteon now has a third the revenue it had in 2000, when it spun off from Ford Motor Co. (F) as a standalone company. Originally dependent on the North American market, in 2010 Visteon said it got 40 percent of its sales from Asia (VC) and 36 percent from Europe. It counts Hyundai Motor Co. (005380), based in Seoul, among its biggest customers. Including results from unconsolidated joint ventures, Visteon gets 56 percent of its sales from Asia.

The units being sold are less profitable than Visteon as a whole, which reported a 10.2 percent gross margin in 2010, the company said in a July investor presentation.

Visteon’s interiors business, with $2.16 billion in revenue in 2010, trails only Faurecia (EO) SA in the $43 billion global market. Visteon forecasts its market share to grow to 7 percent by 2014 and the total market to expand to $52 billion. The company’s target is to boost the unit’s gross margin to at least 8 percent by 2014 from 6 percent in 2010.

To contact the reporters on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net

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