Tenneco, a designer, manufacturer and distributor of Ride Performance and Clean Air products, signed a definitive agreement to acquire auto parts maker Federal-Mogul.
Federal-Mogul will be acquired from Icahn Enterprises for a total consideration of $5.4 billion to be funded through cash, Tenneco equity and assumption of debt.
JPMorgan and Barclays Bank committed to provide an aggregate amount of $4.9 billion of debt financing, consisting of a $1 billion term loan A, a $2.4 billion term loan B and a $1.5 billion revolving credit facility, which will finance the cash consideration portion of the purchase price and replace the company’s existing senior credit facilities and certain senior facilities at Federal-Mogul.
The term loan A and revolving credit facility will mature on the fifth anniversary of closing, and the term loan B will mature on the seventh anniversary of closing. The new credit facilities will be secured on a senior basis by substantially all assets of the company on a pari passu basis with Federal-Mogul’s existing secured notes, and will be guaranteed by certain material domestic subsidiaries. The commitment to provide financing is subject to specified limited conditions.
Tenneco 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 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.
“This is a landmark day for Tenneco with an acquisition that will transform the company by creating two strong leading global companies, each in an excellent position to capture opportunities unique to their respective markets,” said Brian Kesseler, CEO of Tenneco.
Carl C. Icahn, chairman of Icahn Enterprises, said, “Icahn Enterprises acquired majority control of Federal-Mogul in 2008 when we saw an out-of-favor market opportunity for a great company. During that time, we have built one of the leading global suppliers of automotive products. I am very proud of the business we have built at Federal-Mogul and agree with Tenneco regarding the tremendous value in the business combination and separation into two companies. We expect to be meaningful stockholders of Tenneco going forward and are excited about the prospects for additional value creation.”
Barclays served as the lead financial advisor to Tenneco and provided a fairness opinion to Tenneco’s board of directors. J.P. Morgan acted as an M&A advisor to Tenneco. Kirkland & Ellis and Mayer Brown provided legal advice to Tenneco.
