Modine Manufacturing (NYSE:MOD) executives outlined a planned separation of the company’s Performance Technologies (PT) segment and its combination with Gentherm in a transaction they said will accelerate Modine’s shift into a “high-growth, pure-play Climate Solutions company.” The details were discussed on a conference call following a joint announcement between the two companies.
Transaction structure and timeline
President and CEO Neil Brinker said the deal is structured as a Reverse Morris Trust, in which Modine will spin off its Performance Technologies business and simultaneously combine it with Gentherm. Management said the structure is intended to be tax-free for Modine and its shareholders, citing the relative size of the businesses and “substantial overlap in shareholders” as factors enabling the approach.
The companies expect the deal to close in the fourth quarter of calendar 2026, subject to Gentherm shareholder approval and other customary conditions, including regulatory approvals and certain tax opinions.
Strategic rationale: two focused companies
Brinker framed the move as the latest step in a multi-year transformation that began around Modine’s 2022 Investor Day, including what he called a portfolio evolution driven by “80/20” operating principles. He said that over the past five years Modine has completed six divestitures and six acquisitions, shifting toward higher-growth, higher-margin businesses.
Management said it had previously been working to exit non-strategic portions of PT, including the automotive business, but concluded that combining PT with Gentherm “is the best path forward” after evaluating the opportunity. Brinker said Gentherm is a “natural owner” of PT as it seeks to broaden its thermal management solutions and expand in power generation, commercial, and heavy-duty end markets.
Executives described the outcome as two stronger, more focused companies:
- Gentherm + PT: A larger thermal management solutions provider with expanded technologies and “precision flow management” capabilities.
- Modine (remaining): A streamlined Climate Solutions business focused on data centers and commercial HVAC&R, with capital allocation directed toward high-growth initiatives.
Financial profile of the “new Modine” Climate Solutions business
Brinker said that over the 12 months ending September 30, 2025, Modine’s Climate Solutions segment generated $1.6 billion in revenue. He said the company expects fiscal-year revenue growth of 35% to 40% to nearly $2 billion, driven by organic growth in data centers and “recent acquisitions within HVAC technologies.”
He also cited trailing twelve-month Adjusted EBITDA margin for Climate Solutions of 19.6%, representing $307 million of Adjusted EBITDA, and said management expects “meaningful growth” in revenue and EBITDA in fiscal 2026.
On costs, CFO Mick Lucareli said the company is not anticipating any significant stranded costs from the transaction, and expects corporate costs to remain “relatively flat.” He added there will be one-time deal costs but said management is not expecting material ongoing stranded costs because growth in Climate Solutions should absorb corporate resources.
Modine also said it plans to change its reporting structure after the deal: the new Modine would operate through two primary business segments—data centers and commercial HVAC&R—and expects to begin reporting its Climate Solutions business under that structure in the first quarter of fiscal 2027.
Data center growth outlook and capacity investment
Brinker emphasized data centers as a core growth driver, stating the business has grown at a 93% CAGR over the last two years. He said Modine expects market demand for thermal cooling to continue for the next 5 to 10 years and anticipates 50% to 70% annual growth over the next two years based on order books, backlog visibility, and facility ramp progress.
He also said that within the next 12 to 24 months, Modine expects to replace the roughly $1 billion of PT revenue with revenue from the data center market alone.
During Q&A, Lucareli said Modine expects capital spending of roughly $125 million to $150 million this year and indicated a similar level next year to support growth. He said that level of investment would provide capacity to support $2 billion to $3 billion of revenue.
Asked whether the PT separation affects the path to Modine’s longer-term data center target, executives said it does not. Brinker said one facility conversion plan referenced previously is “not in the perimeter,” indicating it is not part of the transaction scope as discussed on the call. He also said Modine’s data center cooling suite is positioned to benefit as chip technology evolves, emphasizing that the need to remove heat is “intensifying,” and referencing adiabatic cooling solutions and free cooling technologies within the company’s portfolio.
Executives discussed product mix and content. Brinker said Modine expects less than half of current-year data center revenue to come from chillers, with the mix moving closer to 50/50 next year. He also cited roughly $600,000 per megawatt of content, adding that chillers with free cooling may be “slightly more expensive.”
Regulatory steps and interim reporting
Lucareli said management is not currently concerned about non-customary regulatory challenges. He noted that an RMT typically involves a Gentherm shareholder vote, IRS-related work, and other legal or local approvals.
On reporting prior to closing, Lucareli said Performance Technologies will continue to be reported within continuing operations until the transaction closes. He added the company will continue separating Climate Solutions, PT, and corporate results to allow investors to build pro forma models, and said Modine expects to provide recast financial statements after closing.
About Modine Manufacturing (NYSE:MOD)
Modine Manufacturing Company (NYSE:MOD) is a global provider of thermal management solutions serving automotive, commercial transportation, heavy-duty off-highway, industrial, HVAC and refrigeration markets. The company designs, manufactures, tests and markets a broad array of heat-transfer products that manage temperature and energy efficiency for engines, power electronics and building climate control systems.
Its product portfolio includes heat exchangers, condensers, radiators, evaporators, charge air coolers, fan systems and associated controls.
