Automotive industry firm Tenneco buys Federal-Mogul for $5.4 billion

In a bid to gain a prominent share in the rapidly growing Asia automotive & transportation industry, auto parts maker Tenneco Inc., recently announced its decision to buy Federal-Mogul. Incidentally, this company of powertrain components is being purchased from Icahn Enterprises LP, with the final deal reported to be worth USD 5.4 billion.

Elaborating further on the details of transaction, sources familiar with the matter cite that the deal would be funded with a combination of a stock & cash transaction including USD 800 million in cash and a total of 29.5 million shares of Tenneco, including the non-voting stock and debt. In a company statement, it was revealed that Icahn will have a combined 36 percent of Tenneco’s voting & non-voting stock, as per a slide deck on the deal.

Sources cite that the deal is expected to end by the second half of 2018, following which Tenneco plans to separate its combined business into two independent and publicly trading companies in a time span of a year. To better compete in the fast-paced automotive & transportation industry, Tenneco said that one of the companies will specialize in the powertrain technology while the other is expected to focus on auto parts such as axle dampers and suspensions.

Icahn will still retain a board seat at the powertrain products company, cite authentic reports. Despite buying Federal-Mogul, Tenneco is expected to continue its business with Icahn’s companies, the only difference being Icahn won’t have control over the unit as it had as an owner.

For the record, Federal-Mogul is a renowned name in the automotive & transportation industry that sells auto parts and myriad other products under brands such as Goetze, Interfil, and Champion.

As reported by Business Standard, in a premarket trading, Tenneco’s shares climbed 2.8 percent to USD 57.11.