Hankook Tire Co. and an investment partner will pay about $3.6 billion for a majority stake in Visteon Corp. (VC)’s South Korean unit, extending the tiremaker’s reach into temperature-control for cars.
Hankook will spend 1.082 trillion won ($982 million) for a 19.49 percent stake, and Hahn & Co. will pay for the rest of Visteon’s 70 percent interest in Halla Visteon Climate Control Corp., according to separate statements from Visteon and Seoul-based Hankook.
The acquisition will help diversify Hankook’s business and strengthen its competitiveness, the company said in its filing today. The agreement also gives South Korea’s largest tiremaker the right of first refusal should Hahn decide to sell its stake, helping offset concern about Halla Climate’s future after being bought by an investment firm, said Koh Tae Bong, an analyst at HI Investment & Securities Co.
“Hankook will now have two major engines to power its business, tire and automotive air-control parts, creating considerable synergy for the company,” Koh said. Hankook’s participation also reduces the likelihood of Halla Climate being sold to “hostile entities” in future, he said.
The transaction represents an enterprise value for Halla Climate of about 10.1 times earnings before interest, taxes, depreciation and amortization for the 12 months ended Sept. 30, according to Visteon’s statement yesterday.
The deal is subject to regulatory and shareholder approvals, and expected to be completed in the first half of 2015, Visteon said.
Hankook rose 2.1 percent to close at 53,600 won in Seoul trading and Halla Visteon Climate climbed 1.6 percent. South Korea’s Kospi index declined 0.1 percent.
Visteon rose 5.1 percent to $100.56, the highest price since Sept. 26, in New York yesterday. The stock has gained 23 percent this year.
Van Buren, Michigan-based Visteon, which exited bankruptcy in 2010, sold its car air-control business to Halla Climate in 2013. The auto-parts maker, which has explored the possibility of splitting in two, is focusing on connected cars as in-vehicle technology is the top selling point for 39 percent of car buyers, according to an Accenture study.
“Suppliers are all trying to focus on the higher margin parts and climate control just isn’t, on a long-term basis, a high-margin part,” said Gregory Coppola, managing director of Alderney Advisors, a Southfield, Michigan company that works with auto suppliers.
Source : http://www.bloomberg.com/