FILE PHOTO: Billionaire activist investor Carl Icahn gives an interview on FOX Business Network’s Neil Cavuto show in New York February 11, 2014. REUTERS/Brendan McDermid/File Photo
April 10, 2018
(Reuters) – Activist investor Carl Icahn said on Tuesday he was selling auto parts maker Federal-Mogul to Tenneco Inc <TEN.N> in a $5.4 billion deal that will also give him a stake in the company.
Tenneco’s shares rose 6 percent to $59.03 in early trading, while Icahn Enterprises <IEP.O> was up about 2 percent at $60.81.
Tenneco will pay $800 million in cash and 29.5 million of its common shares and take on the debt of Federal-Mogul, which makes powertrain parts including pistons, ignition coils and spark plugs.
After the deal closes, Tenneco will separate into two independent, publicly traded companies – one focusing on powertrain products and the other on auto parts such as suspensions and axle dampers.
Icahn’s investment in Federal-Mogul is paying off after the investor slowly built his position in the company for about two decades. Icahn first bought convertible bonds in the company in 2001 for $1.1 billion, and finally took it private last year after buying the remaining 18 percent he did not already own.
Icahn’s firm Icahn Enterprises <IEP.O> typically buys undervalued assets, improves their operations, and ultimately sells them at a profit.
“We expect to be meaningful stockholders of Tenneco going forward,” Icahn said in a statement.
The deal is expected to generate $200 million in annual earnings and $250 million in working capital.
Lake Forest, Illinois-based Tenneco, whose customers include Caterpillar Inc <CAT.N>, Harley-Davidson Inc <HOG.N> and Ford Motor Co <F.N>, would now also get Cummins Inc <CMI.N> and luxury carmaker Jaguar as clients.
Barclays was the lead financial adviser to Tenneco, while J.P.Morgan was the M&A adviser.
(Reporting by Arunima Banerjee and Ankit Ajmera in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur)
