Shares of Adient Plc closed about 17.9% higher on Friday after the automotive seating company announced the sale of its stake in Yanfeng Adient Seating Co. (YFAS) to Yanfeng Automotive Trim Systems Ltd. (YF).
As part of its transformation plan in China, Adient (ADNT) will sell its 49.99% interest in YFAS to YF for $1.5 billion in cash.
As part of the deal, Adient will acquire YFAS’s 50% equity interest in CQYFAS (Chongqing Yanfeng Adient Automotive Components Co. Ltd) and 100% equity interest in YFAS-LF (Yanfeng Adient Seating Co. Ltd.), and consolidate their businesses.
Adient’s CEO Doug Del Grosso said, “These pending transactions offer Adient an opportunity to drive our China strategy independently and further position the company for future growth in the world’s largest automotive market.” Grosso said that the transaction proceeds will offer immediate value to the company’s shareholders. The company expects the deals to be completed in the second half of 2021.
Upon closing of the deals, the company expects its fiscal 2021 global consolidated sales to increase by $700-$800 million and adjusted EBITDA to increase by $90-$100 million, on an annual basis. Furthermore, the company expects an improvement in its earnings post the deal, driven by debt reduction and lower financing costs. (See Adient stock analysis on TipRanks)
Following the announcement, RBC Capital analyst Joseph Spak raised the stock’s price target to $55 (15.9% upside potential) from $46 and maintained a Buy rating. The analyst believes that the restructuring of its China operations will help the company operate independently in China and have greater capital structure flexibility.
Turning now to the rest of the Wall Street community, Adient has a Moderate Buy consensus rating based on 5 Buys, 2 Holds and 1 Sell. The average analyst price target of $44.75 implies downside potential of about 6% to current levels, given the share price rally of about 188.6% over the past year.
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