BorgWarner to spin off Fuel Systems and Aftermarket business | The Financial Express

BorgWarner to spin off Fuel Systems and Aftermarket business

Following completion of the intended separation, BorgWarner would consist of the company’s current e-Propulsion & Drivetrain and Air Management segments.

BorgWarner to spin off Fuel Systems and Aftermarket business

BorgWarner today announced its intention to execute a tax-free spin-off of its Fuel Systems and Aftermarket segments into a separate, publicly traded company, NewCo. Following completion of the intended separation, BorgWarner would consist of the company’s current e-Propulsion & Drivetrain and Air Management segments.

The Company believes it is positioned to be a market leader in EV propulsion, with long-term, secular growth opportunities and an enhanced focus on the development and commercialization of EV technologies, while continuing to deliver top-quartile margins and strong cash generation.

The Company expects that the intended separation would better allow BorgWarner to focus resources on organic and inorganic opportunities that position it to deliver the goals underlying “Charging Forward.” The Company estimates that, after giving effect to the intended transaction, it is already on track with its organic bookings and acquisitions to date to deliver more than 22 percent of its revenue from electric vehicles by 2025, less than two years into the execution of its five-year strategy.

With continued execution of its electrification growth initiatives, the Company believes that it would ultimately achieve or exceed its stated target of 25 percent of revenue from electric vehicles by 2025

Through the first nine months of 2022, BorgWarner’s Air Management segment generated revenue of approximately $5.5 billion and segment adjusted operating margin of 13.7 percent, while its e-Propulsion and Drivetrain segment generated revenue of approximately $3.9 billion and segment adjusted operating margin of 6.9 percent.

The midpoint of the Company’s guidance provided on October 27th included approximately $12.3 billion in revenue, after considering inter-segment eliminations, from BorgWarner’s e-Propulsion & Drivetrain and Air Management segments for the full fiscal year 2022.

Following the intended separation, NewCo would consist of the Company’s current Fuel Systems and Aftermarket segments. NewCo is expected to be a product leader in fuel systems and aftermarket distribution with balanced and synergistic exposure among Commercial Vehicle (CV), Light Vehicle (LV) and Aftermarket end markets, as well as broad regional exposures.

NewCo is expected to benefit from its embedded relationships with global OEMs and focus on the global vehicle parc, which would be predominantly combustion-based through 2040. NewCo would also plan to capitalize on the growth trends in Gasoline Direct Injection (GDI) and Hydrogen Injection Systems.

Through the first nine months of 2022, the Fuel Systems segment generated revenue of approximately $1.7 billion and segment adjusted operating margin of 11.3 percent, while the Aftermarket segment generated revenue of just under $1.0 billion and segment adjusted operating margin of 14.5 percent.

The midpoint of the Company’s guidance provided on October 27th included approximately $3.3 billion in revenue, after considering inter-segment eliminations, from the Fuel Systems and Aftermarket segments for the full fiscal year 2022.

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First published on: 07-12-2022 at 12:17 IST