Adapted from a report by Ryan Beene, Crain's Detroit Business
Glendale, Wisconsin -- Automotive seat maker and interiors specialist Johnson Controls Inc.'s proposed $1250-million takeover of the interiors and electronics business of auto supplier Visteon Corp., has been delayed following a court ruling. Visteon is currently in Chapter 11 bankruptcy protection, and Judge Christopher Sontchi made the move in order to give Visteon shareholders more time for reorganisation.
JCI produces polyurethane foam seats, pads, arm and head rests, seat back and interior trims for the automotive market.
A hearing had been expected on 25 May to approve the disclosure statement for Visteon's most recent reorganisation plan, where some of the company's bondholders would receive 95 percent of Visteon's new common stock if they could raise $1250 million through a rights offering.
The cash would be used to repay existing lenders holding about $1600 million in loan debt.
Shareholders objected to the plan -- as they have for months -- because it wiped out existing equity. Visteon's lenders also objected to the plan because of more than $100 million in fees Visteon would have owed to bondholders who complete the rights offering.
JCI wants to acquire Visteon's interiors and electronics businesses -- including the related technical centres, tooling, equipment, plants, employees and working capital in the businesses, according to a 20 May letter sent by JCI ceo Stephen Roell to Visteon ceo Donald Stebbins.
Key drivers in JCI's interest in the Visteon units are its ownership stakes in Chinese joint ventures Yanfeng Visteon, Yanfeng Visteon Automotive Electronics Co. Ltd and Chongqing Changan Visteon Engine Control Systems, Roell said in the 20 May letter.
The offer excluded any unfunded pension liabilities, Visteon's cash, long-term debt, warranty claims and Visteon's climate control products business, according to the letter.
Roell said JCI is prepared to begin due diligence as soon as Visteon is able.
Visteon spurned JCI's overture in a statement issued recently, calling the proposal "highly conditional," saying it was unclear if the deal would add any value for Visteon stakeholders and noting timing of the announcement came late in the bankruptcy process.
JCI "is a direct competitor that stands to benefit by introducing delay and complexity into the Visteon reorganisation process," Visteon commented.
"Visteon has had extensive and difficult experiences with [JCI] in prior transactions. We are mindful that exploring a transaction of this size and scope at this time could distract the company from its primary objective of completing the ongoing reorganisation process in a manner that enhances value for all of our constituents."
JCI said it first approached Visteon about this most recent deal in January, and again on 7 May and 20 May. JCI also conducted due diligence more than two years ago to evaluate Visteon's electronics business for a possible acquisition.
'Constant change in financials'
In his 20 May letter, Roell recalled that due diligence to respond to Stebbins' claims that JCI has not moved quickly on past dealings with Visteon.
"As you recall, when we conducted our due diligence on that business, the delay was caused in large part by the constant change in the financials that Visteon provided as we progressed through the process," Roell said. "Over the past two years, I'm confident that your team has improved the financial reporting of the business segments."
Jacqueline Strayer, JCI's vice president of corporate communication, said last week that JCI made its interest public because it wanted to make its interest known before Visteon's reorganisation plan hearing today.
"This is not something that has transpired recently," Strayer said. "We've been interested for months in this part of the business."