Visteon seen as possible takeover target -analyst

Mon Jun 27, 2011 3:35pm EDT

* Visteon's presence in Asia may attract suitors -analyst

* Operating structure more complex than peers

* Shares up more than 4 pct in June, besting S&P 500

DETROIT, June 27 (Reuters) - Visteon Corp (VC.N), which emerged from bankruptcy protection last year, could be a "takeover candidate" for another auto parts supplier looking to boost its presence in Asia, an analyst said on Monday.

"Visteon is on the road to recovery," Gimme Credit analyst Evan Mann wrote in a research note. "Operating margins should improve over the intermediate term as the company pursues growth initiatives and increases volumes.

"We also view Visteon as a possible takeover candidate for a global auto parts supplier looking to expand its presence in Asia, especially China," he added.

Visteon could not be reached for comment. In recent weeks, other analysts have also noted that Visteon could sell part of its business.

Asia is the world's fastest-growing region for the industry and automakers and their suppliers are rushing to expand operations there. China recently surpassed the United States as the world's largest auto market.

"We, quite frankly, like that overweight position in Asia," Visteon Chief Financial Officer Bill Quigley said at a June 15 conference. "That region will continue to, in our opinion, dominate overall vehicle global production."

Visteon holds a 50 percent stake in Yanfeng Visteon Automotive Trim Systems, a Chinese supplier of interiors and seating, and 70 percent of Halla Climate, a South Korean maker of air conditioning for vehicles. Some analysts have said Visteon could buy the remaining 30 percent stake in Halla.

"VC's operating structure is more complicated than the typical high yield auto parts supplier, but investors are rewarded with extra yield," Mann wrote.

Visteon, which makes air conditioning, electronics and lighting systems for automakers, derived 41 percent of its sales from Asia last year, according to its annual filing.

About 29 percent of sales last year came from the fast-growing Korean automaker Hyundai (005830.KS). Another core customer is Ford Motor Co (F.N), which made up a quarter of Visteon's sales.

In the first quarter, Visteon won $300 million in new business, with the majority to be manufactured in Asia, Mann wrote.

So far in June, Visteon's shares have risen 4.4 percent, while the S&P 500 index has fallen 4.5 percent. Shares were down 2 percent Monday afternoon to $63.94.

MANY STRATEGIC OPTIONS

In a June 8 research note, JP Morgan analyst Himanshu Patel said Visteon could sell its interior business, which has been struggling in Europe, but thriving in China.

Visteon could sweeten an interiors deal by selling its stake in Yanfeng, which could fetch $2.3 billion, Patel wrote. Possible bidders for that stake may include Johnson Controls Inc (JCI.N), Lear Corp (LEA.N) and French supplier Faurecia (EPED.PA).

Visteon could also consider selling its lighting business, Patel and UBS analyst Colin Langan said in notes.

Visteon entered bankruptcy in May 2009. Last year, the company sold or closed its weaker factories and its operations recovered alongside the rebound in the global auto industry.

The company's pink sheet stock jumped to $2 per share from a few pennies at the end of 2009. This rise triggered a fight for control of the company among the holders of secured loans, shareholders and Johnson Controls. [ID:nN31232167]

"JCI attempted to buy Visteon in bankruptcy, and we continue to believe another offer is not outside the realm of possibility, especially given the interior margin improvement opportunity potential under JCI's management," Langan said in a June 14 research note. (Reporting by Deepa Seetharaman; Editing by Gary Hill)

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