Visteon Faces Breakup: Reuters

Reuters is reporting that a Visteon Corp. hedge fund shareholder that will get two board seats soon has been pushing to break up the U.S. auto parts supplier, betting the company has more value in pieces than as a whole, people close to the situation said.

Visteon’s management previously rejected calls for a breakup by the shareholder, Alden Global Capital, and other hedge fund investors, arguing its businesses are closely intertwined and it would be costly and complicated to split up and sell those businesses, these people said.

Visteon, a former Ford Motor Co subsidiary, is among nearly 50 U.S. auto parts suppliers that went bankrupt during the financial crisis only to emerge under the ownership of hedge funds and distressed-sector investors that typically do not own firms for the long-term.

As the auto industry rebounds from its recession lows, these funds have seen the value of their investments rise substantially and are now looking to take the profits home.

Visteon, which has four different business lines, is seen as more vulnerable to breakup pressure than more streamlined rivals such as Lear Corp. and Dana Holding Corp., which also have a temporary ownership base after emerging from bankruptcy.

Visteon has a market value of about US$3.5 billion — far less than what many shareholders believe the company’s various pieces could add up to. Visteon’s two lucrative Asian assets alone could be worth US$3 billion to US$4 billion, analysts said.

The diversified structure is weighing on the company’s shares, which are down 8 percent so far this year since the stock started trading on the New York Stock Exchange on January 10. It trades at below 4 times enterprise value to estimated 2012 earnings before interest, tax, depreciation and amortization, versus the North American auto supplier sector average of 5.6 times tracked by Morgan Stanley.