Tenneco To Buy Federal-Mogul
By Mike Osenga10 April 2018
In the first mega-company industry deal in recent years, Tenneco, a global designer, manufacturer and distributor of ride performance and clean air products and technology solutions, announced that it has signed a definitive agreement to acquire Federal-Mogul, a global supplier to original equipment manufacturers and the aftermarket. About the only other recent deal of this size, in these markets, was ZF’s 2015 acquisition of TRW in a $13.5 billion deal.
In this instance, 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.
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.
Tenneco is a $9.3 billion global manufacturing company with headquarters in Lake Forest, Ill. and approximately 32,000 employees worldwide. Tenneco’s principal brands name are Monroe, Walker, XNOx and Clevite Elastomer.
Federal-Mogul, with revenue of $7.8 billion, operates two independent divisions with its headquarters in Southfield, Mich. 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 products for the global vehicle aftermarket, while also serving original equipment vehicle markets.
As a result of the acquisition, Tenneco said it will 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 powertrain technology company is expected to start as a $10.7 billion entity, while the aftermarket and ride performance group will be about an $6.48 billion company.
The powertrain technology company will combine Tenneco’s Clean Air product line and Federal Mogul’s Powertrain business. The combined business will offer products and systems solutions to improve engine performance and meet tightening criteria pollutant regulations and fuel economy standards. Tenneco added that with its global scale, the company will drive content growth due to the demand for improved engine performance, tightening emissions regulations, light vehicle hybridization and expanded market opportunities with commercial truck and off-highway customers.
The aftermarket and ride performance company will combine of Tenneco’s Ride Performance business with Federal-Mogul’s Motorparts business to establish a global aftermarket presence with brands that include Monroe, Walker, Wagner, Champion, Fel-Pro and MOOG.
Tenneco said the company’s broader aftermarket product coverage, stronger distribution channels, and enhanced channel development is expected to strengthen its position in established and high growth markets such as China and India and capture evolving e-commerce opportunities.
On the OE side of the business, the combination creates a portfolio of braking and advanced suspension technologies and capabilities.
Tenneco’s announcement said that separating the companies strategically positions each with organizations in their respective markets with the strategic and financial flexibility to drive long-term value creation. Further, it scales both companies with size, broader product portfolios and greater capabilities to capitalize on industry trends unique to each. Third, it enhances capabilities to capture growth with focused investments. And finally, provides investors with distinct investment opportunities.