UPDATED: 4/10/18 8:48 am ET -- adds details
Automotive supplier Tenneco Inc. has reached a definitive agreement to acquire Federal-Mogul for $5.4 billion.
The deal, which will be financed through $800 million in cash, about 30 million Tenneco shares and assumption of debt, will result in two independent publicly traded companies following closing, Lake Forest, Ill.-based Tenneco said in a news release.
The acquisition is expected to close in the second half of this year, subject to regulatory approvals, 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," Tenneco CEO Brian Kesseler said in the release. "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."
The two new companies will be born after the union of Tenneco and Federal-Mogul — one a $6.4 billion aftermarket supplier and the other a $10.7 billion powertrain technology supplier, the company said.
The deal marks an exit for billionaire investor Carl Icahn, who has sought to monetize his investment in Federal-Mogul since 2007, when he purchased unsecured Federal-Mogul bonds before its bankruptcy and eventually swapped them for equity as part of the company's reorganization plan.
In early 2017 and after nearly a year of posturing with Federal-Mogul's shareholders, Icahn took full ownership of Federal-Mogul in a roughly $300 million deal.
Icahn Enterprises LP, through his indirect wholly owned subsidiary IEH FM Holdings LLC, sealed the deal after Federal-Mogul's second-largest shareholder, Gabelli Asset Management Company Investors, tendered 7 million shares to Icahn, providing enough shares to take over the public company outright, Bloomberg reported.
"Icahn Enterprises acquired majority control of Federal-Mogul ... when we saw an out-of-favor market opportunity for a great company," Icahn said in a statement. "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."
You can reach Dustin Walsh at dwalsh@crain.com
