Southfield Federal-Mogul Acquired by Tenneco for $5.4B, to be Separated into Two Publically Traded Companies

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Tenneco, a leading designer, manufacturer, and distributor of ride performance and clean air products based in Lake Forest, Ill., today announced it has signed a definitive agreement to acquire Federal-Mogul in Southfield, a leading global supplier to original equipment manufacturers and the aftermarket.

Federal-Mogul is being acquired from Icahn Enterprises L.P. for a total consideration of $5.4 billion to be funded through cash, Tenneco equity, and assumption of debt.

Tenneco also announced its intention to separate the combined businesses into two independent, publicly traded companies through a tax-free spin-off to shareholders that will establish an aftermarket and ride performance company, and a powertrain technology company.

The acquisition is expected to close in the second half of 2018, subject to regulatory and shareholder approvals and other customary closing conditions, with the separation occurring in the second half of 2019.

“This is a landmark day for Tenneco with an acquisition that will transform the company by creating two strong leading global companies, each in an excellent position to capture opportunities unique to their respective markets,” says Brian Kesseler, CEO of Tenneco.

“Federal-Mogul brings strong brands, products, and capabilities that are complementary to Tenneco’s portfolio and in line with our successful growth strategies. Unleashing two new product focused companies with even stronger portfolios will allow them to move faster in executing on their specific growth priorities.”

Carl C. Icahn, chairman of Icahn Enterprises, stated: “Icahn Enterprises acquired majority control of Federal-Mogul in 2008 when we saw an out-of-favor market opportunity for a great company. During that time, we have built one of the leading global suppliers of automotive products. I am very proud of the business we have built at Federal-Mogul and agree with Tenneco regarding the tremendous value in the business combination and separation into two companies. We expect to be meaningful stockholders of Tenneco going forward, and are excited about the prospects for additional value creation.”

Upon completion of the acquisition, Tenneco will operate the combined businesses under a structure designed to begin concurrently the successful integration of Tenneco and Federal-Mogul and the separation of the aftermarket and ride performance and the powertrain technology companies.

Tenneco will acquire Federal-Mogul for $5.4 billion through a combination of $800 million in cash, 5.7 million shares of Tenneco Class A common stock (representing a 9.9% voting interest), 23.8 million shares of Non-Voting Class B common stock, and assumption of debt. Under the agreement, Tenneco can reduce the number of shares of Class B Non-Voting common stock by up to 7.3 million shares and increase the cash consideration proportionately at the closing.

Tenneco has put in place committed debt financing to fund the transaction, which will replace Tenneco’s existing senior credit facilities and certain senior facilities at Federal-Mogul.

Upon closing, Tenneco expects a pro forma net debt-to-adjusted EBITDA ratio of approximately 3x. The company is targeting a net debt-to-adjusted EBITDA ratio of approximately 2.5x by the end of 2019.

Tenneco is a $9.3 billion global manufacturing company with approximately 32,000 employees worldwide. The company’s principal brand names include Monroe, Walker, XNOx, and Clevite Elastomer.

Federal-Mogul, with annual revenue of $7.8 billion, operates two independent divisions that combined have nearly 55,000 employees worldwide. Federal-Mogul Powertrain designs and manufactures original equipment powertrain components and systems protection products for automotive, heavy-duty, industrial, and transport applications.

Federal-Mogul Motorparts sells and distributes a broad portfolio of aftermarket brands, include ANCO, Beck/Arnley, Champion, FP Diesel, Sealed Power and Speed-Pro engine products, MOOG, and Abex, Ferodo, Jurid, and Wagner brake products and lighting.

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