ZURICH -- Car parts and machinery maker Rieter AG said it would ask for shareholder approval to split its automotive and textiles units into distinct companies.
The Swiss company announced the split on Tuesday, when it reported a net profit in 2010 after two consecutive years of losses, with overall sales up 32 percent and a 64 percent jump in orders.
The textiles unit will continue as Rieter, and the automotive unit will be called Autoneum. The automotive division, which is currently known as Rieter Automotive Systems, makes floor carpeting and acoustic systems used in the interiors of cars and trucks.
The move will allow each unit to raise its own capital, make investments and expand its footprint, according to Credit Suisse bank.
"The purpose of the demerger is to give the company its own access to the capital markets to fund its future growth and improve its strategic flexibility," said Marco Illy, Credit Suisse head of investment banking.
Credit Suisse and UBS advised on the demerger. "This is the first demerger in Switzerland, since 2009. Market conditions are much more conducive for such transaction structures," Illy said.
Illy said institutional investors like market leaders in particular sectors, which could favor Autoneum, which will list on the SIX Swiss exchange in mid-May.
"There is a preference among auto investors to invest in focused players such as Autoneum, even more so in sub-sectors like acoustic and thermal management with a reduced number of competitors," he said
"The thermal management and acoustics supply industry is expected to grow faster than the car market on the back of attractive fundamentals, such as the trend toward noise and weight reduction," he said.
Rieter Automotive Systems ranks No. 85 on the Automotive News Europe list of the top 100 global suppliers, with sales to automakers of $1.31 billion in 2009.