Racine-based Modine Manufacturing Corp. has spent $27 million preparing its automotive business for sale. The company was close to pulling the trigger on a deal, but ultimately decided to walk away.
Tom Burke, chief executive officer of Modine, declined to say just how close the two parties got, but said the decision was the result of market and economic conditions, deal complexity and overall value.
“Clearly the process has taken longer than anticipated due to the industry and economic uncertainty, but we will make the right decision for our shareholders,” Burke said, later adding the company had a valuation it was comfortable with at the start of the process that it was not comfortable with at the end of an exclusivity period during negotiations.
Modine’s automotive business accounts for roughly $540 million in annual revenue, nearly a quarter of the company’s sales. Burke noted earlier this year that while Modine’s history is tied to the industry, including providing radiators for the Model T, the capital investment required hurts returns for the rest of its vehicle segment.
“This has been a long-term part of our company … going back to the model T and more,” Burke said. “Making that change was not an easy emotional decision, it was an easy financial decision”
In January, Modine announced it would explore alternatives for the business and in May said it would move forward with a sale.
Burke said Friday the company had received good initial interest from both strategic and financial buyers and is beginning the process of reopening negotiations with interested parties.
“We want to make sure it’s a good deal for the company, for our shareholders,” Burke said.
Analysts questioned how Modine had already spent $27 million on the sale and review process. Mick Lucareli, chief financial officer of Modine, said the total is primarily for third-party work in accounting, legal and IT that was needed to untangle the automotive business from the rest of the vehicle segment.
The automotive business makes products at 10 of the segment’s 18 plants, but some locations are co-mingled with other product lines, Burke said in May.
None of the automotive plans are in Wisconsin and the company has a limited number of employees involved in the business at its Racine headquarters.
