Investing.com — Shares of Aptiv (NYSE:) rose 5% in pre-market trading after the company announced a plan to split its electricity distribution systems business into two independent entities. This strategic move is expected to augment the focus and flexibility of both Aptiv and the novel standalone EDS business, enabling them to better serve their markets and capitalize on growth opportunities.
Kevin Clark, president and CEO of Aptiv, said the decision marks the next phase of the company’s transformation. The separation is intended to enable both entities to more effectively meet customer needs and take advantage of market opportunities, which will translate into greater success and increased shareholder value. Aptiv’s goal is to focus on advanced software and hardware technologies, adapting to global trends such as security, electrification and connectivity. Post-separation, Aptiv expects solid financial results with mid- to high-single-digit revenue growth and robust cash flow.
The novel EDS company is expected to build on its century-old heritage with a focus on delivering next-generation electrical architecture solutions to the automotive and commercial vehicle markets. With targeted mid-single-digit revenue growth and solid free cash flow, EDS plans to strengthen its competitive position through strategic investments and capital return to shareholders.
The division is scheduled to be completed by March 31, 2026 and is expected to be tax-free for both Aptiv and its shareholders. The transaction is subject to customary conditions, including approval by Aptiv’s Board of Directors and the effectiveness of a Form 10 registration statement filed with the U.S. Securities and Exchange Commission.
Concurrent with the announcement, Aptiv reaffirmed its full-year 2024 guidance, which was originally announced on October 31, 2024. The company is scheduled to release its fourth-quarter 2024 financial results on February 6, 2025, and will discuss details during an investor call scheduled for the same day.
The strategic separation is viewed as a positive step towards strengthening the companies’ respective market positions and financial prospects, potentially leading to increased investor interest in the distinct value propositions offered by Aptiv and the novel EDS entity post-separation.
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