Visteon Corporation has rejected the unsolicited US$1.25bn bid by Johnson Controls for its interiors and electronics businesses and said it would continue with its reorganisation plan “to emerge from bankruptcy as a strong, independent, stand-alone company”.
In a letter released publicly Visteon told JCI: “Without risk-adjusting your proposal, our careful analysis demonstrates that your acquisition of selected assets, while excluding certain liabilities, would accelerate other costs and would not significantly enhance recoveries to our creditors or provide recovery for our equity holders.
Additionally, the realisation of other risks associated with the proposed transaction would negatively impact our creditors and leave equity holders further removed from any recovery. It is also likely your proposal would involve a lengthy extension to the time we would remain in bankruptcy, which could undermine much of the successful work we have done to emerge as a strong company in the sector.”
Visteon also asked JCI to stop contacting its customers.
The surprise Johnson Controls cash bid on 21 May was said by analysts to have underscored expectations for a steady recovery in global auto sales.
In bankruptcy, key Ford supplier Visteon has overhauled its operations and balance sheet and first quarter profit soared to $233m from $2m a year earlier.
The two units Johnson Controls proposed buying had $6bn in revenue in 2008, the last full year before Visteon filed for bankruptcy. The deal would have more than doubled Johnson Controls’ revenue in the booming Chinese market to over $7bn in 2011, according to Reuters.
Visteon’s proposed reorganisation would give holders of US$870m of unsecured bonds the opportunity to buy $1.25bn in stock in the reorganised company. That money, along with $400m in new debt, would be used to pay off the company’s secured lenders in full.
The secured lenders and equity holders both oppose the plan and have argued that it undervalues Visteon’s assets.
“It’s very regrettable,” Martin Bienenstock, an attorney with Dewey & LeBoeuf, which represents a group of hedge funds that hold about 12% of the company’s stock, told Reuters.
“It shows the company is trying to avoid an auction. It shows the company is trying to avoid a market test to show how much equity there is.”
On 24 May, Delaware bankruptcy court judge Christopher Sontchi delayed a hearing on Visteon’s request to approve an agreement that would have underpinned the company’s proposed reorganisation, asking the supplier to work on a consensual agreement with lenders and shareholders.