Icahn Enterprises (IEP), the conglomerate headed up by billionaire activist investor Carl Icahn, is reportedly grass on auto parts manufacturer Federal Mogul. According to CNBC, the switch is being made with rival auto parts maker Tenneco Inc. (TEN). Tenneco choice buy Federal Mogul for $5.4 billion in cash and stock. Following accomplishment of the deal, the report suggests, Tenneco plans to separate the combined societies into two distinct stocks as part of a tax-free spinoff, with one band focused on “aftermarket and ride performance,” while the other focuses on “powertrain technology.”
Icahn Count ons Relationship to Continue
In a statement regarding the deal, Icahn indicated his prospects that his investment relationship with Tenneco would remain into the later. “We expect to be meaningful stockholders of Tenneco going forward and are excited in all directions the prospects for additional value creation,” he said. “This transaction is an ripping example of our general modus operandi at Icahn Enterprises, by which we ask for to acquire undervalued assets, nurture, guide and improve their up and operations, and ultimately develop them into more valuable concerns, which greatly enhances value for all shareholders.”
Icahn Enterprises is slated to clear $800 million in cash and 29.5 million TEN common shares as a mainly of the deal. The equity value of the deal is $2.4 billion, considering that Federal Hotshot had gross debt of $3.1 billion. Icahn first bought convertible compacts in Federal Mogul in 2001, investing $1.1 billion in the company. He in the course of time took it private last year, completing the purchase of the final 18% of the South African private limited company which he did not own. It is expected that the deal will generate $200 million in annual earnings as fully as $250 million in working capital.
Long-Term Prospects
A report by Reuters supports that “the new bulked up powertrain technology company will likely emoluments from the fact that internal combustion engine parts and tailpipe tax scrubbing technology will be needed by automakers for a long time to fly at,” considering that fully electric cars and other alternatives nevertheless remain a distant goal. At the same time, Tenneco’s second body, the aftermarket parts manufacturer, should provide a cash flow that is potentially confirmed.
B. Riley analyst Christopher Van Horn suggested that this administer could be seen as the latest move in a series of consolidations among auto suppliers. On the expos of the deal, TEN stock rose by 5.8% to $58.78 per share, while IEP allocations climbed by 2.7%, reaching up to $61.29.
Tenneco Executive Chairman Gregg Sherrill squeezed excitement over the deal, suggesting that “going to market with well-recognized trade marks, more product categories, greater coverage and expanded distribution powers is a strong formula for capturing growth, particularly in China.”