Johnson Controls Inc. (JCI) has offered $1.25 billion to buy bankrupt auto supplier Visteon Corp.’s (VSTNQ) automotive interiors and electronics business in China in order to expand its operations in the country. Earlier, in January this year, the company has approached Visteon for the unit and expressed its interest in a letter last week.
However, Visteon has rejected its rival Johnson’s bid stating that it was vague and missed necessary details. The former subsidiary of Ford Motor Co. (F) has also accused Johnson’s bid as an attempt to cause a distraction from completing its reorganization in Chapter 11 bankruptcy filing.
In May last year, Visteon filed for bankruptcy protection when automakers were slashing production and shutting down manufacturing units to cope with reduced demand on the back of an economic crisis. However, the company has yet to emerge from bankruptcy. Recently, the judge presiding over its bankruptcy filing granted the company more time to materialize its reorganization plan.
Visteon’s interiors business manufactures instrument panels and other parts while its electronics business deals with lighting products, audio systems and wireless equipment. Johnson aims to enhance its Automotive Experience business (which produces automotive interior systems for original equipment manufacturers) in China by acquiring the two units of Visteon’s. The company is especially eyeing Visteon’s booming operations in Shanghai.
Currently, Johnson has 23 joint ventures and 40 manufacturing facilities in China. The acquisition would add another 45 facilities to the company’s operations in the country. Through the acquisition, the company expects to generate $7 billion in revenue from China in 2011, which is more than double the expected revenue of $3 billion in 2010. In 2009, the company has recorded revenue of $1.9 billion in China.
Visteon has revealed that its past dialogues with Johnson regarding the acquisition have been uncomfortable. However, the company has not denied extending its negotiation with JCI until it emerges from Chapter 11.
Last month, Johnson Controls also decided to acquire Visteon’s two factories in Mexico and Michigan for more than $17 million that supplies auto interiors for Chrysler. However, the company backed out from the deal later.
Visteon showed an improvement in profit to $233 million in the first quarter of 2010 from $2 million in the year-ago period. Its sales rose 42% to $1.85 billion during the quarter.
On the other hand, Johnson has reported a profit of $292 million or 43 cents per share in the second quarter of fiscal 2010 ended March 31, 2010, in stark contrast to a loss of $97 million or 16 cents per share (excluding non-recurring items) in the same quarter of fiscal 2009. The company’s net sales increased 32% to $8.3 billion.
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