Shares of Adient (ADNT 8.73%), a leading global producer of automotive seating, jumped as much as 19% higher Friday morning after the auto supplier announced it would be selling its 50% stake in the Yanfeng Adient Seating (YFAS) joint venture to its joint venture partner, Yanfeng.
Adient will sell its 50% stake in YFAS to Yanfeng for $1.5 billion in cash. On the flip side, Adient will acquire YFAS' 50% stake in Chongqing Yanfeng Adient Automotive Components and also a 100% stake in YFAS' Yanfeng Adient (Langfang) Seating. Once the transaction is completed, which is expected to be in the second half of 2021, Adient will consolidate those businesses. The proceeds will be used for general corporate purposes and to prepay a portion of the company's debt.
The deal sounds more complicated than it really is, and at the end of the transaction Adient will simply be able to drive its China strategy independently from its joint venture partner. That strategic decision is expected to have a number of benefits to investors, including enabling Adient to capture growth in more profitable and expanding segments, increase integration of its China operations, and optimize its business value. "In addition, proceeds from the transactions will provide immediate value to Adient's stakeholders," said Doug Del Grosso, president and CEO of Adient, in a press release. China's automotive market is massive, and it's understandable investors sent the stock up nearly 20% Friday morning -- but the company must prove it can navigate the market on its own, without venture partners.