Leoni AG – German automotive cable and wiring systems specialist along with product, solution and services provider for energy and data management, has made an announcement about its proposed plans for selling its Wire & Cable Solution (WCS) division. The company is deciding on either to directly sell or float on the stock exchange market as an individual company or partial stock sale of WCS.
Reasons for Disinvestment
Leoni is in burden of Euro 50 Million due to its Merida plant in Mexico, hence has also abandoned its 2019 target, leading to job cuts and possible disinvestment. As stated in an article of Reuters dtd. 17th March 2019, major reason for a possible disinvestment are continued challenging market environment particularly in China along with fallen demand from car makers for wiring systems (automotive makes are major and continuous buyers of Leoni’s wiring systems). Therefor the company has planned for restructuring and reviewing the existing group structure.
Wire & Cable Solution division (WCS): This division Concentrates on cable solutions (hardware).
Wiring Systems Division (WSD): This division focuses on energy and data solutions majorly software and power transmission.
Rationale for the proposed Separation of WCS from Leoni Group
WCS and WSD have little overlapping and less synergies between the divisions, therefore it is relatively easier for the Leoni group to plan for separation of these divisions. A separation should thus lead to two focused companies with possibility to utilize each to its full potential and increase operation individually. The corporate support function shall also transfer from the holding company to the divisions on separation.
Leoni CEO, Aldo Kamper says in Leoni’s press release dtd. 10th July 2019 “This creates two clearly focused businesses whose individual market and technological development as well as investments can be better and more quickly implemented.”
After separation Leoni shall focus resources and strategic development on the Wiring Systems Division (WSD). Though the group has not reached any final decision yet.
In the words of Leoni CEO, Aldo Kamper “We expect the decision to separate WCS from the group puts us in a position to focus our resources on WSD and strengthens our ability to further strategically develop this business.”
With focus on WSD, Leoni expects to build on its leading position in automotive wiring systems. The company wants to transition as a global solutions provider for the automotive sector as well become a leading provider of engineered cables and interconnect solutions.