Investing.com — Shares of Aptiv (NYSE: ) rose 5% in pre-open trading after the company announced its plan to separate its Electrical Distribution Systems business into two independent entities. The strategic move is expected to improve the focus and agility of Aptiv and the new standalone EDS business, allowing them to better serve their respective markets and take advantage of growth opportunities.

Kevin Clark, chairman and chief executive officer of Aptiv, stated that this decision marks the next phase of the company’s transformation journey. The separation is designed to position both entities to more effectively meet customer needs and to take advantage of market opportunities, driving greater success and shareholder value. Aptiv aims to concentrate on advanced software and hardware technologies, aligned with global trends such as safety, electrification, and connectivity. Following the separation, Aptiv expects a strong financial performance with mid- to high-single-digit revenue growth and strong cash flow generation.

The new EDS company is expected to build on its century-old legacy, focusing on delivering next-generation power architecture solutions to the automotive and commercial vehicle markets. With targeted mid-single digit revenue growth and strong free cash flow, EDS plans to improve its competitive position through strategic investment and return of capital to shareholders.

The spin-off is planned to be completed by March 31, 2026, and is intended to be tax-free for Aptiv and its shareholders. The transaction is subject to customary conditions, including approval from Aptiv’s Board of Directors and the effectiveness of a Form 10 registration statement with the US Securities and Exchange Commission.

In line with the announcement, Aptiv also reaffirmed its full-year 2024 outlook, which it previously provided on October 31, 2024. investor call scheduled for the same day.

The strategic separation is seen as a positive step towards improving the companies’ respective market positions and financial prospects, potentially leading to increased investor interest in the distinct value propositions offered. of Aptiv and the new EDS entity post-separation.

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