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Autoliv lifts shares with plans to split into two listed companies

[STOCKHOLM] - Sweden's Autoliv said it planned to split into two listed companies, with one focused on high-tech safety gear to capture the rapid growth towards self-driving vehicles, lifting its shares on Thursday.

Autoliv is the biggest player by far in the market for safety gear such as airbags and seatbelts which generate the bulk of its earnings. It has yet to reach a dominant position in new fields such as radar, visions systems and driver assistance software that are key for development of self-driving cars.

The company believes both businesses are undervalued and hopes the split will make them more appealing to investors. "A reason to do this is to clarify the potential in these businesses," Autoliv Chief Executive Jan Carlson told Reuters. "To show the strength of possibly the world's strongest product portfolio in electronics as well as the strong development we have in passive safety." Investors have been putting pressure on car makers and their suppliers to more clearly identify the growth parts of their businesses, areas such as automated driving, electrification and digital technology.

Delphi Automotive, another major auto supplier, recently announced plans to separate into two entities - one dedicated to internal combustion technology and the other focused on electrification and automation.

Autoliv said its listing could happen in about a year, but added that while that was the company's intention, it was not ruling out alternatives.

Analysts at Jefferies noted in a research note the consolidation opportunities in the electronics business.

"The split will clearly help to bring the true value of Autoliv's excellent market positions and strong product offering to the surface," said John Hernander of Nordea, the firm's fifth largest shareholder.

Autoliv has seen major market share gains on order intake in its traditional, passive safety business over the past two years following the collapse of Japanese rival Takata.

But the auto industry's long lead times have meant that Autoliv is only now starting to reap the full benefits of those business wins, while strong orders in its electronics business will only gradually filter through into sales in coming years.

Extra spending needed to deliver the influx of orders in recent years and technology investments needed have weighed on the stock, while worries have mounted over slower growth in the global car market.

Autoliv's U.S.-listed shares are flat so far this year, lagging a 16 percent rise in the Dow Jones U.S. Automobiles & Parts Index.

Global carmakers and electronics firms such as Intel Corp and Qualcomm Inc are racing to develop the emerging technology of autonomous vehicles.

In electronics, Autoliv's recent tie-ups include a joint venture with Geely-owned Volvo Cars, and partnerships with chipmaker Nvidia, as well as Velodyne over LiDar technology.

The company said it expected sales to top US$12 billion in 2019 while analysts are on average forecasting sales of US$11.9 billion in 2019, Thomson Reuters data shows.

It also gave sales and profit forecasts for the separate entities for 2020, giving further upside to consensus forecasts, according to Jefferies.