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Tenneco Wins Shareholder Nod for USD 5.4bn Federal-Mogul Acquisition
Friday 14 September 2018

14 September 2018 - Shareholders of US-based ride performance and clean air products and technology solutions provider Tenneco (NYSE: TEN) have approved all of the proposals necessary to complete the acquisition of US-based automotive supplier Federal-Mogul, the company said.

Federal-Mogul is being acquired from Icahn Enterprises L.P. for a total consideration of USD 5.4bn 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.

Tenneco is a USD 9.3bn global manufacturing company with headquarters in Lake Forest, Illinois and approximately 32,000 employees worldwide. 

It is one of the world's largest designers, manufacturers and marketers of ride performance and clean air products and systems for automotive and commercial vehicle original equipment markets and the aftermarket. 

Tenneco's principal brand names are Monroe, Walker, XNOx and CleviteElastomer.

Federal-Mogul, with revenue of USD 7.8bn, operates two independent divisions with its headquarters in Southfield, Michigan and 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 products under many of the most recognized brands in the global vehicle aftermarket, while also serving original equipment vehicle manufacturers with products including braking, wipers and a range of chassis components.

The company's aftermarket brands include ANCO, Beck/Arnley, BERU*, Champion, Interfil, AE, Fel-Pro, FP Diesel, Goetze, Glyco, National, Nüral, Payen, Sealed Power and Speed-Pro engine products; MOOG; and Abex, Ferodo, Jurid and Wagner brake products and lighting.

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.

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.
Aftermarket and Ride Performance Company.

The strategic combination of Tenneco's Ride Performance business with Federal-Mogul's Motorparts business will establish a global aftermarket firm with an impressive portfolio of some of the strongest brands in the aftermarket including Monroe, Walker, Wagner, Champion, Fel-Pro and Moog.

THis company's broader aftermarket product coverage, stronger distribution channels, and enhanced channel development will strengthen its position in established and high growth markets (China and India), and drive success through new mobility models and capturing evolving e-commerce opportunities.

On the OE side of the business, the combination creates a portfolio of braking and advanced suspension technologies and capabilities that set the foundation for meeting changing performance requirements for comfort and safety, and ultimately reinventing the ride of the future with new solutions for ride differentiation and capitalizing on electrification and autonomous driving trends.

The powertrain technology company will be one of the largest pure play powertrain suppliers through the combination of Tenneco's Clean Air product line and Federal Mogul's Powertrain business, bringing together market leaders with reputations for innovation in meeting the changing needs of customers.

Tenneco will acquire Federal-Mogul for USD 5.4bn through a combination of USD 800m in cash, 5.7m shares of Tenneco class A common stock (representing a 9.9% voting interest), 23.8m 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 7.3m 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 expects that the transaction will generate significant value for shareholders.

Barclays served as the lead financial advisor to Tenneco and provided a fairness opinion to Tenneco's board of directors. J.P. Morgan acted as an M and A advisor to Tenneco. J.P. Morgan and Barclays provided committed financing for the transaction. Kirkland and Ellis LLP and Mayer Brown LLP provided legal advice to Tenneco.
Details
Date Published: 14/09/2018
Target: Federal-Mogul
Country: USA
Deal Size: 5.4bn (USD)
Sector: Motor Vehicles
Type: LBO
Financing: Cash and Stock
Status: Agreed
Vendor: Icahn Enterprises
Buyer: Tenneco
Buyer Advisor: Barclays , J.P. Morgan , Kirkland and Ellis , Mayer Brown
Comment:
Tenneco plans 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.

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