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BorgWarner to Sell Remy Light Vehicle Aftermarket Business


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BorgWarner Inc. (BWA - Analyst Report) announced its decision to sell the light vehicle aftermarket business of Remy International, which it acquired last year along with other businesses, to an investor group led by Torque Capital Group, for roughly $80 million. The transaction is expected to conclude in the fourth quarter of 2016, subject to customary closing conditions.

BorgWarner will be selling production facilities in San Luis Potosi, Mexico; Piedras Negras, Mexico; Twinsburg, OH; Edmond, OK; Brussels, Belgium; Jemmal (Menzel Harb), Tunisia; as well as Miskolc, Hungary. Roughly 3,000 employees work at this business unit. The company will retain Remy International’s core electric rotating business to complement its own development focus on hybrid and electric vehicle propulsion systems. The deal also does not include any other products or technologies of BorgWarner, including the Delco Remy commercial vehicle products.

In the first half of 2016, revenues from the light vehicle aftermarket business were roughly $142 million. On the conclusion of the sale, BorgWarner expects to incur a pre-tax loss between $95−$125 million in 2016, including the write-off of the excess purchase price paid for the acquisition of Remy International in 2015.

BorgWarner, which operates in the same sector as Cooper-Standard Holdings Inc. (CPS - Snapshot Report) , Spartan Motors Inc. (SPAR - Snapshot Report) and SORL Auto Parts, Inc. (SORL - Snapshot Report) , saw its adjusted earnings rise to 84 cents per share in the second quarter of 2016 from 75 cents recorded in the prior-year quarter. The figure also beat the Zacks Consensus Estimate. Revenues in the second quarter increased 14.6% year over year to $2.33 billion. Excluding revenues from the Remy acquisition, sales improved 3.5%.

BorgWarner ended the quarter with cash of $495 million compared with $577.7 million as of Dec 31, 2015. Long term debt as of Jun 30, 2016 was $2.63 billion compared with $2.55 billion as of Dec 31, 2015. In first-half 2016, net cash from operating activities increased to $362 million from $319 million in the year-ago period. Capital expenditures, including tooling outlays, declined to $235 million from $285 million in the first half of 2015.

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