This $2 Million Auto Account could open the door to the entire industry

Steve’s breakdown: Federal-Mogul just got sold to Tenneco and the very old and tired agency relationship Federal has is ready for freshening. That’s your cue!

Laura Soave at laura.soave@federalmogul.com is the SVP & CMO.

SOTUTHFIELD, MI: Activist investor Carl Icahn said on Tuesday he was selling auto parts maker Federal-Mogul to Tenneco 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 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 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, Harley-Davidson and Ford Motor Co., would now also get Cummins and luxury carmaker Jaguar as clients.

Barclays was the lead financial adviser to Tenneco, while J.P. Morgan was the M&A adviser.

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