Aptiv stock surges on spin-off plan

Investing.com — Shares of Aptiv (NYSE:) climbed 5% in pre-open trading following the company’s announcement of its plan to separate its Electrical Distribution Systems business into two independent entities. The strategic move is expected to enhance the focus and agility of both Aptiv and the new standalone EDS business, allowing them to better serve their respective markets and capitalize on growth opportunities.

Kevin Clark, chairman and chief executive officer of Aptiv, stated that this decision marks the next phase in the company’s transformation journey. The separation is designed to position both entities to more effectively meet customer needs and to leverage market opportunities, driving greater success and shareholder value. Aptiv aims to concentrate on advanced software and hardware technologies, aligning with global trends such as safety, electrification, and connectivity. Post-separation, Aptiv anticipates a robust financial performance with mid-to-high single digit revenue growth and strong cash flow generation.

The new EDS company is expected to build on its century-long legacy, focusing on delivering next-generation electrical architecture solutions to the automotive and commercial vehicle markets. With a targeted mid-single digit revenue growth and solid free cash flow, EDS plans to enhance its competitive position through strategic investments and capital returns to shareholders.

The spin-off is planned to be completed by March 31, 2026, and is intended to be tax-free for both Aptiv and its shareholders. The transaction is subject to customary conditions, including approval from Aptiv’s Board of Directors and the effectiveness of a Form 10 registration statement with the U.S. Securities and Exchange Commission.

In tandem with the announcement, Aptiv reaffirmed its full-year 2024 outlook, which was initially provided on October 31, 2024. The company is set to release its fourth quarter 2024 financial results on February 6, 2025, and will discuss the details during an investor call scheduled for the same day.

The strategic separation is seen as a positive step towards enhancing the companies’ respective market positions and financial prospects, potentially leading to increased investor interest in the distinct value propositions offered by Aptiv and the new EDS entity post-separation.

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