Investing.com — Shares of Aptiv (NYSE: ) rose 5% in pre-open trading after the company announced plans to spin off its electrical distribution systems business into two independent entities. The strategic move is expected to increase the focus and agility of both Aptiv and the new independent EDS business, allowing them to better serve their respective markets and capitalize on growth opportunities.
Kevin Clark, Chairman and CEO of Aptiv, said this decision represents the next phase of the company’s transformation journey. The separation is designed to enable both entities to more effectively meet customer needs and capitalize on market opportunities, resulting in greater success and shareholder value. Aptiv aims to focus on advanced software and hardware technologies that align with global trends such as security, electrification and connectivity. Following the separation, Aptiv expects strong financial performance to generate mid- to high-single-digit revenue growth and strong cash flow generation.
The new EDS company is expected to build on its centuries-old heritage focused on delivering next-generation electrical architecture solutions to the automotive and commercial vehicle markets. With mid-single digit revenue growth on target and solid free cash flow, EDS plans to strengthen its competitive position through strategic investments and return of capital to shareholders.
The spin-off is scheduled 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 the approval of Aptiv’s board of directors and the effectiveness of a Form 10 registration statement with the US Securities and Exchange Commission.
Along with the announcement, Aptiv reaffirmed its full 2024 outlook, which was originally set at October 31, 2024. The company plans to report its fourth-quarter 2024 financial results on February 6, 2025, and will discuss the details with an investor call scheduled for the same day.
The strategic separation is seen as a positive step to strengthen the companies’ respective market positions and financial prospects, potentially increasing investor interest in the value propositions of the separated Aptiv and the new EDS unit.
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