Tenneco has announced that it has signed a definitive agreement to acquire Federal-Mogul for a total consideration of $ 5.4 bn (about Rs 35,000 crore) and form two publicly traded companies. Tenneco, global supplier of ride performance and clean air products and technology solutions, is acquiring this global supplier to OEMs and aftermarket from Icahn Enterprises L.P. through cash, Tenneco equity and assumption of debt. The combined businesses are being planned to be separated 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.
This 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 transformational acquisition accelerates long-term value creation by creating two focused, purpose-built industry leaders in their respective markets with greater scale, and strategic and financial flexibility, the company noted. It added that the acquisition is expected to bring value growth, and generate synergy opportunities of at least $ 200 min in annual earnings and $ 250 mn in working capital.
Tenneco said the Aftermarket and Ride Performance original equipment company will be one of the leading multiline aftermarket and OE suppliers with. It will include premier aftermarket brands, broad product coverage and strong distribution, along with a strong portfolio of OEM braking and advanced suspension technologies and capabilities. The company said it will have a strategic position to improve go-to-market capabilities in the Americas and EMEA regions, capture Asia-Pacific aftermarket growth and capitalise on new OEM trends in mobility, electrification/autonomous driving.
Meanwhile, the Powertrain Technology company will be one of the largest pure play powertrain suppliers globally with a portfolio of engine-to-tailpipe products and system solutions. This company will be in a good position to capture content growth, noted Tenneco. This is due to the demand for improved engine performance, tightening fuel economy and criteria pollutant regulations, light vehicle hybridisation trends, and commercial truck and off-highway expansion opportunities.
Brian Kesseler, CEO, Tenneco, said this is a landmark day for the company with an acquisition that will transform the company by creating two strong leading global companies. Federal-Mogul brings strong brands, products and capabilities that are complementary to Tenneco’s portfolio and in line with its successful growth strategies, he added. Kesseler noted that unleashing two new product-focused companies with even stronger portfolios will allow them to move faster in executing on their specific growth priorities.
The company acquired majority control of Federal-Mogul in 2008 when it saw an out-of-favour market opportunity for a great company, noted Carl C Icahn, Chairman, Icahn Enterprises. He said that during that time, it has built one of the leading global suppliers of automotive products. “We expect to be meaningful stockholders of Tenneco going forward and are excited about the prospects for additional value creation,” added Icahn.
“Today’s announcement is an extension of Tenneco’s proven strategies for delivering profitable growth and will accelerate each company’s ability to capitalise on trends that are fundamentally changing our industry,” said Gregg Sherrill, Executive Chairman, Tenneco. He added that this is a major step forward in building an even stronger position with the combination of strategically-aligned companies and the subsequent separation of the businesses, realigned in such a way to unlock shareholder value.