Investing.com — Shares of Aptiv (NYSE: ) rose 5% in open trading after the company announced its plan to split its Power Distribution Systems business into two independent entities. The strategic move is expected to increase the focus and expertise of Aptiv and the newly independent EDS business, allowing them to better serve their markets and take advantage of growth opportunities.
Kevin Clark, chairman and chief executive officer of Aptiv, said the decision marks the next phase in the company's transformation journey. The separation is designed to position both entities to better meet customer needs and maximize market opportunities, driving greater efficiency and shareholder value. Aptiv aims to focus on advanced software and hardware technologies, aligned with global trends in security, electronics, and connectivity. After the split, Aptiv expects strong financial performance with high single-digit revenue growth and strong cash flow.
The new EDS company is expected to build on its century-old heritage, focusing on providing next-generation electronic design solutions for the automotive and commercial markets. With a target for mid-single digit revenue growth and free cash flow, EDS plans to strengthen its competitive position through strategic investments and greater returns 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 filing of a Form 10 registration statement with the US Securities and Exchange Commission.
In line with this announcement, Aptiv reaffirmed its outlook for the full year 2024, which was first provided on October 31, 2024. an investor call scheduled for the same day.
The planned split is seen as a positive step in improving the companies' respective positions and financial prospects, which could lead to increased investor interest in the different value propositions offered by Aptiv and the new EDS entity after the split.
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