Dana(US:DAN)2025-06-12 13:00Dana Incorporated Off Highway Business Divestiture Update Summary Company Overview - Company: Dana Incorporated (DAN) - Event: Off Highway Business Divestiture Update Conference Call - Date: June 12, 2025 Key Points Industry and Transaction Details - Dana announced the sale of its Off Highway business to Allison Transmission Holdings for an enterprise value of $2.7 billion [6] - The transaction is structured as a 100% cash deal and is expected to close in late Q4 2025, subject to regulatory approvals [10][11] - The sale is expected to generate approximately $2.4 billion in net proceeds after liabilities, fees, taxes, and separation costs [10] Financial Implications - The sale allows Dana to achieve a 7x multiple on the expected Off Highway 2025 adjusted EBITDA, capturing value not reflected in its stock price [7] - Dana plans to use about $2 billion of the proceeds to pay down debt, targeting a net leverage ratio of 1x over the business cycle [11][17] - A total capital return of $1 billion to shareholders is planned through 2027, with $550 million expected to be returned around the closing time [11][18] Business Focus Post-Divestiture - Post-transaction, Dana will focus on two main business segments: light vehicle and commercial vehicle systems, emphasizing leadership in both traditional internal combustion engine (ICE) and electrification technologies [13] - The aftermarket business is projected to contribute 10-12% of total sales, providing a higher EBITDA margin profile [14] Cost Reduction and Financial Performance - Dana is on track with a $300 million cost savings plan, with $225 million expected to be realized this year [20][21] - The company anticipates generating $225 million in free cash flow for the year, aligning with estimates [20] - Adjusted EBITDA margins are expected to reach 10-10.5% in 2026, with ongoing margin improvement initiatives [21][49] Market Outlook - North American commercial vehicle demand is expected to soften, while light vehicle demand remains stable [19] - The company is experiencing a decline in tariff exposure, which is becoming less of a risk [20] - Dana's backlog includes a robust pipeline of new business opportunities in both light and commercial vehicle segments [22] Shareholder Returns and Capital Allocation - The return of capital to shareholders will be executed through dividends and opportunistic share repurchases, with a focus on maintaining a conservative balance sheet [17][18][44] - The company is committed to returning $1 billion to shareholders, which represents approximately 40% of its market cap [17] Additional Insights - The retained Off Highway business, generating about $130 million in sales, is expected to have marginal EBITDA contributions [59] - Dana's electrification strategy is being reassessed to align with market realities, with a focus on improving near-term cash flow [24][85] - The company is not heavily focused on regional market dynamics but rather on product capabilities and customer needs [93][96] Conclusion Dana Incorporated's divestiture of its Off Highway business marks a significant strategic shift aimed at enhancing shareholder value and focusing on core business segments. The transaction is expected to strengthen the company's balance sheet, improve financial flexibility, and position Dana for future growth in the light and commercial vehicle markets.