PHINIA Spin-off Deep Dive

June 30, 2023


BorgWarner (BWA) will spin-off PHINIA (PHIN), its Fuel Systems and Aftermarket segments, by the end of the day on July 3, 2023. Regular way trading will begin on July 5, 2023. BWA will spin-off 100% of PHIN. Shareholders will receive 1 share of PHIN for every 5 shares of BWA.

In 2022, the SpinCo businesses generated $3.6BN in revenue (21% of total revenue) and have an adjusted operating profit of 14.5% (vs. 13.7% for RemainCo).

PHIN is trading in the when issued market at $31.50. At that price, the company has an enterprise value of $2.0BN and a market cap of $1.5BN.

Its valuation multiples are as follows: EV / 2023 sales: 0.6x, EV / 2023 EBITDA: 4.1x, P / 2023 FCF: 7.4x.

While this looks reasonable on an absolute basis, I don’t think it looks particularly attractiv