Aptiv to Separate Electrical Distribution Systems Business
Aptiv, a global leader in technology focused on creating a safer, greener, and more connected future, today revealed that its Board of Directors has unanimously approved a strategic move to separate its Electrical Distribution Systems (EDS) business from the parent company. This decision will create two distinct, independent companies, each strategically positioned to better serve their customers and generate greater value for their shareholders.
Kevin Clark, Chairman and CEO of Aptiv, stated, “We have a longstanding history of transforming Aptiv through strategic operational changes and portfolio shifts—both organic and inorganic—that help us better adapt to the ever-evolving market landscape. The announcement of this separation is the next pivotal step in that journey. By sharpening our focus and optimizing operations, we will enable Aptiv and EDS to more effectively address the changing needs of our customers, seizing new market opportunities that will ultimately drive greater success and value creation for both companies.”
Following the completion of this transaction, Aptiv will possess a portfolio that is centered around advanced software and hardware technologies, as well as mission-critical products designed to align with global megatrends driving growth across diverse end markets. Aptiv will focus on a high-growth, high-margin business model, generating robust cash flows that support both organic and inorganic investments in differentiated products and solutions. Additionally, Aptiv will target new markets, such as aerospace and defense, telecommunications, commercial vehicles, and industrials, while also returning excess capital to its shareholders.
Clark further emphasized, “The separation brings substantial benefits to both Aptiv and EDS. For EDS, it will build on its century-long legacy as an industry leader in designing next-generation electrical architecture solutions for automotive and commercial vehicle OEMs. EDS’s focused strategy will allow it to leverage its global scale and regional capabilities while enhancing its low and high-voltage vehicle architecture offerings. Together with its cost-efficient operations and disciplined capital allocation, standalone EDS will be in an even stronger position to compete, delivering solid earnings and cash flow growth. This will enable continued investment in acquisitions, manufacturing process automation, and the return of capital to shareholders.”
Benefits of the Separation
As independent entities, both Aptiv and EDS are expected to experience a variety of advantages, including:
- Focused Strategies and Operating Initiatives: Both companies will develop and implement strategies tailored to their specific product portfolios, customer challenges, market opportunities, and financial goals.
- Concentrated Resources and Investments: Each company can allocate resources toward the unique growth drivers and opportunities that align with their distinct business models.
- Optimized Capital Structures and Allocation: Both Aptiv and EDS will adopt capital structures and strategies that align with their most value-creating prospects.
- Targeted Investor Bases: The separation allows each business to attract an investor base that is best suited to its respective value proposition, operating model, and financial characteristics.
- Employee Alignment: Employees at both companies will have career opportunities and compensation packages that are more closely aligned with the financial outcomes of their business.
Two Leading Companies with Global Reach
Aptiv: Pioneering the Future of Mobility
Following the separation, Aptiv will focus on advanced safety, user experience, and engineered components. It will offer a comprehensive technology stack that includes cutting-edge sensor-to-cloud solutions, open-architecture ADAS (Advanced Driver Assistance Systems), in-cabin user experience software platforms, and a wide array of interconnects and components. These products will optimize the distribution of signal, power, and data for next-generation applications across markets such as aerospace and defense, telecommunications, automotive, commercial vehicles, and industrials.
Aptiv’s portfolio is well-positioned to capitalize on significant secular trends including advanced safety, electrification, digitalization, artificial intelligence, and automation. The company is targeting mid-to-high single-digit revenue growth in the medium term, aiming for low-to-mid teen U.S. GAAP operating income margins, high-teens-to-low-twenties adjusted EBITDA margins, and strong free cash flow generation.
Aptiv expects to achieve $12.1 billion in revenue for 2024, with an operating income of $1.4 billion and adjusted EBITDA of $2.3 billion, excluding the EDS business to be spun off.
EDS: Leading the Charge in Vehicle Electrification
EDS, after the separation, will become a standalone global leader in low and high-voltage electrical architectures for the automotive and commercial vehicle markets. With a strong track record in optimizing vehicle architecture systems, EDS will continue to drive vehicle weight reduction, lower costs, and improve efficiency for OEM customers.
The EDS business is well-positioned to meet the growing demand for electric vehicles (EVs) and feature-rich vehicles with more advanced electrical systems. As the demand for EVs continues to outpace global vehicle production, EDS will play a key role in supporting OEMs in the design and delivery of optimized vehicle architectures for the next generation of vehicles.
EDS is projecting mid-single-digit revenue growth in the coming years, along with mid-to-high single-digit GAAP operating income margins, high-single to low-double digit adjusted EBITDA margins, and solid free cash flow. For 2024, EDS is expected to generate $8.3 billion in revenue, $0.4 billion in operating income, and $0.8 billion in adjusted EBITDA, excluding the Aptiv business.
Separation Transaction Details
The separation will occur through a spin-off, whereby Aptiv shareholders will retain their current shares of Aptiv stock and also receive a proportional dividend in shares of the new EDS company. This transaction is anticipated to be tax-free to both Aptiv and its shareholders for both Swiss and U.S. federal income tax purposes. The completion of the separation is expected by March 31, 2026, pending final approval from Aptiv’s Board of Directors and other customary conditions, including the receipt of tax opinions and the filing of a Form 10 registration statement with the U.S. Securities and Exchange Commission.
Aptiv has emphasized that while this separation is planned, there can be no guarantee on its occurrence, timing, or terms until all necessary approvals are secured.
2024 Full-Year Outlook
In connection with the separation announcement, Aptiv reaffirmed its full-year 2024 outlook, which was initially provided on October 31, 2024. The company will release its fourth-quarter 2024 financial results on February 6, 2025, and will hold an investor call at 8:00 a.m. ET that same day.
Conference Call and Webcast
Aptiv will host a conference call to discuss the details of this announcement at 8:00 a.m. ET today. Investors and stakeholders can join the call by dialing +1 323-994-2093 (U.S.) or +1 888-394-8218 (international), or they can listen to the webcast at ir.aptiv.com. The conference ID is 5856118, and a slide presentation will be available on the investor relations section of Aptiv’s website. A replay of the call will be available after the event.
