Aptiva Announces Strategic Plan to Separate Its Electrical Distribution Systems Business
Aptiv PLC, a global technology company committed to enabling a safer, greener, and more connected future, has announced its Board of Directors’ unanimous approval of a plan to separate its Electrical Distribution Systems (EDS) business into a standalone entity. This strategic decision aims to create two independent companies, each uniquely positioned to serve its customers and maximize shareholder value.
Driving Transformation and Growth
Kevin Clark, chairman and CEO of Aptiv, emphasized the importance of this move as part of the company’s ongoing transformation journey. Electrical Distribution We have a long track record of transforming Aptiv through operational changes and strategic portfolio shifts,” he stated. “This separation represents the next step in that journey, enhancing the strategic and operational focus of both Aptiv and EDS Electrical Distribution This will enable each entity to address evolving customer needs and capitalize on market opportunities, driving greater success and value creation.”
Following the separation, Aptiv will continue to focus on advanced software and hardware technologies and mission-critical products aligned with global megatrends such as electrification, automation, and digitalization. The streamlined company will target diverse markets, including aerospace, defense, telecommunications, commercial vehicles, and industrial sectors.
For EDS, the separation provides an opportunity to Electrical Distribution build on its 100-year legacy of delivering next-generation electrical architecture solutions. With a more focused strategy, EDS aims to leverage its global scale, regional capabilities, and broad portfolio of low- and high-voltage vehicle architecture solutions to enhance its competitive position in the automotive and commercial vehicle markets.
Benefits of the Separation
The decision to separate the Electrical Distribution business is expected to deliver several advantages for both entities, including:
- Enhanced Strategic Focus: Each company will develop strategies tailored to its unique product portfolio, customer challenges, and market opportunities.
- Concentrated Resources: Investments will be directed towards the distinct growth drivers of each business.
- Tailored Capital Structures: Financial strategies will be optimized for each entity’s value-creation potential.
- Specialized Investor Base: Investors will have opportunities to align with the unique value propositions and operating models of the two companies.
- Employee Development: The global workforce will benefit from career opportunities and compensation programs aligned with the specific objectives of their respective businesses.
Aptiv’s Future Direction
Post-separation, Aptiv will comprise its Advanced Safety & User Experience and Engineered Components Group. Electrical Distribution The company will offer a comprehensive sensor-to-cloud technology stack, including leading open-architected Advanced Driver Assistance Systems (ADAS) and user experience software platforms. Aptiv’s portfolio will also include a wide range of interconnect solutions designed to optimize the distribution of signal, power, and data across next-generation applications.
With its focus on long-term secular trends such as electrification and automation, Aptiv aims to become a high-growth, high-margin business. The company projects mid-to-high single-digit revenue growth, low-to-mid teens U.S. GAAP operating income margins, and high-teens-to-low-twenties adjusted EBITDA margins in the medium term. For 2024, Aptiv estimates revenues of $12.1 billion, U.S. GAAP operating income of $1.4 billion, and adjusted EBITDA of $2.3 billion, excluding the EDS business.
The New EDS Entity
The new EDS company will focus on designing and delivering low- and high-voltage electrical architectures for automotive and commercial vehicle markets. Electrical Distributions innovative design capabilities optimize vehicle architecture systems, reducing weight, mass, and costs for original equipment manufacturer (OEM) customers. As the demand for feature-rich, high-content vehicles grows, particularly electric vehicles (EVs), EDS is poised to capitalize on this expanding market.
In the medium term, EDS expects to achieve mid-single-digit revenue growth, mid-to-high single-digit GAAP operating income margins, and high-single to low-double-digit adjusted EBITDA margins. For 2024, the company anticipates revenues of $8.3 billion, U.S. GAAP operating income of $0.4 billion, and adjusted EBITDA of $0.8 billion, excluding the Aptiv business.
Separation Transaction Details
The separation will be executed as a tax-free spin-off for Aptiv shareholders, who will retain their current shares and receive a pro-rata dividend of Electrical Distribution shares. Aptiv aims to complete the separation by March 31, 2026, subject to final Board approval and regulatory conditions. This includes the filing and effectiveness of a Form 10 registration statement with the U.S. Securities and Exchange Commission (SEC).
Affirming 2024 Outlook
In conjunction with the announcement, Aptiv reaffirmed its full-year 2024 financial outlook, previously provided in October 2024. The company plans to release its fourth-quarter financial results on February 6, 2025, followed by an investor call.
Conference Call Details
To discuss this announcement, Aptiv will host a conference call today at 8:00 a.m. ET. The call can be accessed by dialing +1 323-994-2093 (U.S.) or +1 888-394-8218 (international), using conference ID 5856118. A webcast and slide presentation will be available on Aptiv’s investor relations website, with a replay accessible after the call.
The separation of Aptiv and EDS marks a pivotal moment for both companies. By pursuing independent paths, each entity will be better equipped to address the unique demands of their respective markets. This strategic move underscores Aptiv’s commitment to innovation, operational excellence, and delivering long-term value to its stakeholders.
