Adient, a global leader in automotive seating, today announced that it has closed the transactions contemplated by its previously announced definitive agreements with joint venture partner Yanfeng Automotive Trim Systems Ltd. (YF) to, among other items, end its YFAS joint venture in China.
The completed transactions will enable Adient to drive its strategy in China independently, which is expected to result in a variety of benefits, including capturing growth in profitable and expanding segments; improving the integration of the company’s China operations; and allowing for more certain value realization relative to status quo, where cash and value are generated from dividends at entities not in Adient’s control.
“We are pleased to have successfully closed these transactions, which offer Adient the opportunity to drive our China strategy independently and position the company for future growth in the world’s largest automotive market,” said Doug Del Grosso, president and CEO of Adient.
Details of the transactions
Under the agreements, Adient sold its 49.99% interest in YFAS to YF and its minority interest in certain other joint ventures and acquired YFAS’s 50% equity interest in CQYFAS, bringing Adient’s ownership stake in CQYFAS to 75%, and YFAS’s 100% equity interest in YFASLF.
Following the acquisition of YFAS’s interests in CQYFAS and YFASLF, Adient will consolidate those businesses. YF will operate the remainder of YFAS as a wholly owned enterprise.
Total net proceeds (including dividends) related to the transactions are expected to total approximately $1.4B. Including the impact of currency hedges executed post-announcement and other provisions contained in the agreement (i.e., ability to consolidate the cash balance at CQYFAS), net proceeds collected at closing totaled $695M, and final proceeds of about $625M are expected to be received prior to calendar year-end.
As previously noted, in conjunction with these transactions, Adient signed an agreement with Chongqing Boxun Industrial Co., Ltd. (Boxun), its joint venture partner in CQYFAS. The agreement provides Boxun with a put right to sell and, if exercised, requires Adient to buy Boxun’s 25% interest in CQYFAS. The put right price is ~ $125M. If Adient buys Boxun’s 25% interest, Adient would own 100% of CQYFAS.
Proceeds from the transactions are expected to be used by Adient to pre-pay a portion of the company’s debt; fund Boxun’s put right, if exercised; and for general corporate purposes.
SOURCE: Adient
