Market Overview

Tenneco to Create Two Independent, Public Companies with Acquisition of Federal-Mogul

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Aftermarket & Ride Performance Company; Powertrain Technology
Company

  • Transformational acquisition accelerates long-term value creation by
    creating two focused, purpose built industry leaders in their
    respective markets with greater scale, and strategic and financial
    flexibility.
  • Brings together complementary businesses - the aftermarket and ride
    performance company will include Tenneco Ride Performance and
    Federal-Mogul Motorparts, and the powertrain technology company will
    include Tenneco Clean Air and Federal-Mogul Powertrain.
  • The aftermarket & ride performance original equipment company will be
    one of the world's leading multi-line aftermarket and OE suppliers
    with:
    • Premier aftermarket brands, broad product coverage and strong
      distribution;
    • A strong portfolio of OE braking and advanced suspension
      technologies and capabilities;
    • An outstanding strategic position to 1) improve go-to-market
      capabilities in the Americas and EMEA regions, 2) capture Asia
      Pacific aftermarket growth, and 3) capitalize on new OE trends in
      mobility, electrification/autonomous driving.
  • The powertrain technology company will be one of the largest pure play
    powertrain suppliers globally with:
    • A portfolio of engine-to-tailpipe products and system solutions;
    • An excellent position to capture content growth due to 1) the
      demand for improved engine performance, 2) tightening fuel economy
      and criteria pollutant regulations, 3) light vehicle hybridization
      trends, and 4) commercial truck and off-highway expansion
      opportunities.
  • Acquisition expected to be value accretive and generate synergy
    opportunities of at least $200 million in annual earnings and $250
    million in working capital.

Tenneco (NYSE:TEN), one of the world's leading designers, manufacturers
and distributors of Ride Performance and Clean Air products and
technology solutions for diversified markets, announced today that it
has signed a definitive agreement to acquire Federal-Mogul, a leading
global supplier to original equipment manufacturers and the aftermarket.
Federal-Mogul is being acquired from Icahn Enterprises L.P. for a total
consideration of $5.4 billion to be funded through cash, Tenneco equity
and assumption of debt.

This press release features multimedia. View the full release here:
https://www.businesswire.com/news/home/20180410005837/en/

Upon completion of the acquisition, Tenneco will operate the combined businesses under a structure d ...

Upon completion of the acquisition, Tenneco will operate the combined businesses under a structure designed to begin concurrently the successful integration of Tenneco and Federal-Mogul and the separation of the aftermarket & ride performance and the powertrain technology companies. (Graphic: Business Wire)

Tenneco also announced its intention to separate the combined businesses
into two independent, publicly traded companies through a tax-free
spin-off to shareholders that will establish an aftermarket & 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, Tenneco. "Federal-Mogul
brings strong brands, products and capabilities that are complementary
to Tenneco's portfolio and in line with our successful growth
strategies. Unleashing two new product focused companies with even
stronger portfolios will allow them to move faster in executing on their
specific growth priorities."

Carl C. Icahn, Chairman of Icahn Enterprises, stated: "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."

Post-Close Operating Structure

Upon completion of the acquisition, Tenneco will operate the combined
businesses under a structure designed to begin concurrently the
successful integration of Tenneco and Federal-Mogul and the separation
of the aftermarket & ride performance and the powertrain technology
companies.

Aftermarket & Ride Performance Company

The strategic combination of Tenneco's Ride Performance business with
Federal-Mogul's Motorparts business will establish a global aftermarket
leader with an impressive portfolio of some of the strongest brands in
the aftermarket including Monroe®, Walker®, Wagner®, Champion®, Fel-Pro®
and MOOG®. The company's broader aftermarket product coverage, stronger
distribution channels, and enhanced channel development will strengthen
its position in established and high growth markets (China and India),
and drive success through new mobility models and capturing evolving
e-commerce opportunities. On the OE side of the business, the
combination creates a portfolio of braking and advanced suspension
technologies and capabilities that set the foundation for meeting
changing performance requirements for comfort and safety, and ultimately
reinventing the ride of the future with new solutions for ride
differentiation and capitalizing on electrification and autonomous
driving trends.

Powertrain Technology Company

The powertrain technology company will be one of the largest pure play
powertrain suppliers through the combination of Tenneco's Clean Air
product line and Federal Mogul's Powertrain business, bringing together
market leaders with reputations for innovation in meeting the changing
needs of customers. The combined business will offer a robust portfolio
of products and systems solutions - from the engine to the tailpipe - to
improve engine performance and meet tightening criteria pollutant
regulations and fuel economy standards. With its global scale, the
company will drive content growth due to the demand for improved engine
performance, tightening emissions regulations, light vehicle
hybridization and expanded market opportunities with commercial truck
and off-highway customers.

Strategic Rationale for Separated Companies

1. Strategically positions each company: focused, purpose-built leaders
in their respective markets with the strategic and financial flexibility
to drive long-term value creation.

2. Scales each company to win: size, broader product portfolios and
greater capabilities to capitalize on industry trends unique to each.

3. Enhances capabilities to capture growth with focused investments.

4. Provides investors with distinct investment opportunities: two strong
companies that have specific growth, capital deployment and product
profiles.

"Today's announcement is an extension of Tenneco's proven strategies for
delivering profitable growth and will accelerate each company's ability
to capitalize on trends that are fundamentally changing our industry,"
said Gregg Sherrill, executive chairman, Tenneco. "This is a major step
forward in building an even stronger position with the combination of
strategically aligned companies and the subsequent separation of the
businesses, realigned in such a way to unlock shareholder value."

Summary Terms of Agreement

Tenneco will acquire Federal-Mogul for $5.4 billion through a
combination of $800 million in cash, 5.7 million shares of Tenneco Class
A common stock (representing a 9.9% voting interest), 23.8 million
shares of Non-Voting Class B common stock and assumption of debt. Under
the agreement, Tenneco can reduce the number of shares of Class B
Non-Voting common stock by up to 7.3 million shares and increase the
cash consideration proportionately at the closing.

Tenneco has put in place committed debt financing to fund the
transaction, which will replace Tenneco's existing senior credit
facilities and certain senior facilities at Federal-Mogul.

Upon closing, Tenneco expects a pro forma net debt-to-adjusted EBITDA
ratio of approximately 3x. The company is targeting a net
debt-to-adjusted EBITDA ratio of approximately 2.5x by the end of 2019.

Tenneco expects that the transaction will generate significant value for
shareholders.

Attachment 1

  • Tenneco Pro Forma Financial Overview
  • Reconciliation of GAAP to Non-GAAP Earnings Measures - Adjusted EBITDA
  • Reconciliation of GAAP to Non-GAAP results – Reallocation of Clean Air
    Aftermarket

Conference Call

Tenneco will host a conference call on April 10, 2018 at 8:30 a.m. ET.
The dial-in number is 1-866-807-9684 (domestic) or 1-412-317-5415
(international). The passcode is Tenneco conference call. The call and
accompanying slides will be available on the investors section of the
Tenneco web site at www.investors.tenneco.com.

A recording of the call will be available one hour following completion
of the call on April 10, 2018 through April 17, 2018. To access this
recording, dial 1-877-344-7529 (domestic) or 1-412-317-0088
(international) or 1-855-669-9658 (Canada). The replay access code is
10119248. The purpose of the call is to discuss the company's
transaction announcement. A copy of the press release is available on
the investors and news sections of the Tenneco web site.

Advisors

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. J.P. Morgan and Barclays provided committed
financing for the transaction. Kirkland & Ellis LLP and Mayer Brown LLP
provided legal advice to Tenneco.

About Tenneco

Tenneco is a $9.3 billion global manufacturing company with
headquarters in Lake Forest, Illinois and approximately 32,000 employees
worldwide.
Tenneco is one of the world's largest designers,
manufacturers and marketers of ride performance and clean air products
and systems for automotive and commercial vehicle original equipment
markets and the aftermarket.
Tenneco's principal brand names are
Monroe®, Walker®, XNOx™ and Clevite®Elastomer.

About Federal-Mogul

Federal-Mogul, with revenue of $7.8 billion, operates two independent
divisions with its headquarters in Southfield, Michigan and nearly
55,000 employees worldwide.
Federal-Mogul Powertrain designs and
manufactures original equipment powertrain components and systems
protection products for automotive, heavy-duty, industrial and transport
applications.
Federal-Mogul Motorparts sells and distributes a
broad portfolio of products under many of the most recognized brands in
the global vehicle aftermarket, while also serving original equipment
vehicle manufacturers with products including braking, wipers and a
range of chassis components. The company's aftermarket brands include
ANCO®, Beck/Arnley®, BERU®*, Champion®,
Interfil®, AE®, Fel-Pro®,
FP Diesel®, Goetze®, Glyco®, National®, Nüral®, Payen®, Sealed
Power® and Speed-Pro® engine products; MOOG®; and Abex®, Ferodo®,
Jurid® and Wagner® brake products and lighting.

About Icahn Enterprises L.P.

Icahn Enterprises, a master limited partnership, is a diversified
holding company engaged in ten primary business segments: Investment,
Automotive, Energy, Railcar, Gaming, Metals, Mining, Food Packaging,
Real Estate and Home Fashion.

Safe Harbor

This release contains forward-looking statements. These forward-looking
statements include, but are not limited to, (i) all statements, other
than statements of historical fact, included in this communication that
address activities, events or developments that we expect or anticipate
will or may occur in the future or that depend on future events and (ii)
statements about our future business plans and strategy and other
statements that describe Tenneco's outlook, objectives, plans,
intentions or goals, and any discussion of future operating or financial
performance. These forward-looking statements are included in various
sections of this communication and the words "may," "will," "believe,"
"should," "could," "plan," "expect," "anticipate," "estimate," and
similar expressions (and variations thereof) are intended to identify
forward-looking statements. Forward-looking statements included in this
release concern, among other things, the proposed acquisition of
Federal-Mogul LLC, including the expected timing of completion of the
proposed acquisition and related transactions; the benefits of the
proposed acquisition; the combined company's plans, objectives and
expectations; future financial and operating results; and other
statements that are not historical facts. Forward-looking statements are
subject to a number of risks and uncertainties that could cause actual
results to materially differ from those described in the forward-looking
statements, including the risk that the transaction may not be completed
in a timely manner or at all due to a failure to satisfy certain closing
conditions, including any stockholder or regulatory approval or the
failure to satisfy other conditions to completion of the transaction;
the occurrence of any event, change or other circumstance that could
give rise to the termination of the purchase agreement; the outcome of
any legal proceeding that may be instituted against Tenneco and others
following the announcement of the transaction; the combined company may
not complete a spin-off of the Aftermarket & Ride Performance business
from the Powertrain Technology business (or achieve some or all of the
anticipated benefits of such a spin-off); the proposed transaction may
have an adverse impact on existing arrangements with Tenneco, including
those related to transition, manufacturing and supply services and tax
matters; the amount of the costs, fees, expenses and charges related to
the transaction may be greater than expected; the ability to retain and
hire key personnel and maintain relationships with customers, suppliers
or other business partners; the risk that the benefits of the
transaction, including synergies, may not be fully realized or may take
longer to realize than expected; the risk that the transaction may not
advance the combined company's business strategy; the risk that the
combined company may experience difficulty integrating all employees or
operations; the potential diversion of Tenneco management's attention
resulting from the proposed transaction; as well as the risk factors and
cautionary statements included in Tenneco's periodic and current reports
(Forms 10-K, 10-Q and 8-K) filed from time to time with the SEC. Given
these risks and uncertainties, investors should not place undue reliance
on forward-looking statements as a prediction of actual results. Unless
otherwise indicated, the forward-looking statements in this release are
made as of the date of this communication, and, except as required by
law, Tenneco does not undertake any obligation, and disclaims any
obligation, to publicly disclose revisions or updates to any
forward-looking statements.

Additional Information and Where to Find It

In connection with the proposed transaction between Tenneco Inc. (the
"Company") and Federal-Mogul LLC, the Company intends to file relevant
materials with the U.S. Securities and Exchange Commission (the "SEC"),
including a preliminary proxy statement on Schedule 14A. Following the
filing of the definitive proxy statement with the SEC, the Company will
mail the definitive proxy statement and a proxy card to each stockholder
entitled to vote at the special meeting relating to the proposed
transaction. This communication is not a substitute for the proxy
statement or other document(s) that the Company may file with the SEC in
connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS
OF THE COMPANY ARE URGED TO READ CAREFULLY THE PROXY STATEMENT
(INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER DOCUMENTS
FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE COMPANY, FEDERAL-MOGUL AND THE PROPOSED
TRANSACTION. Investors and security holders may obtain free copies of
the proxy statement and other relevant materials (when they become
available), and any and all documents filed by the Company with the SEC
may be obtained for free at the SEC's website at www.sec.gov.
In addition, stockholders may obtain free copies of the documents filed
with the SEC by the Company via the Company's Investor Relations section
of its website at investors.tenneco.com or by contacting Investor
Relations by directing a request to the Company, Attention: Investor
Relations, 500 North Field Drive in Lake Forest, Illinois 60045 or by
calling (847) 482-5162.

Certain Information Regarding Participants

The Company and its respective directors and executive officers may be
deemed participants in the solicitation of proxies in connection with
the proposed transaction. Information about the persons who may, under
the rules of the SEC, be considered to be participants in the
solicitation of the Company's stockholders in connection with the
proposed transaction, and any interest they have in the proposed
transaction, will be set forth in the definitive proxy statement when it
is filed with the SEC. Additional information regarding these
individuals is set forth in the Company's proxy statement for its 2018
Annual Meeting of Stockholders, which was filed with the SEC on April 4,
2018, and its Annual Report on Form 10-K for the fiscal year ended
December 31, 2017, which was filed with the SEC on February 28, 2018.
You may obtain these documents (when they become available) free of
charge at the SEC's web site at www.sec.gov
and from Investor Relations at the Company.

No Offers or Solicitations

This document shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of Section 10 of the U.S. Securities Act of 1933, as amended.

Attachment 1

         
Tenneco Pro Forma Financial Overview
 

 

Total Value-add Adjusted Earnings EBITDA

Pro Forma FY 2017

Revenue (NYSE:B) Revenue (NYSE:B) EBITDA (NYSE:M)

Synergies (NYSE:M)(2)(3)

(w/ synergies) (NYSE:M)

 
Ride Performance (Plus CA AM)(1) $3.1 $3.1 $335 - -
F-M Motorparts 3.3 3.3 260 - -
Aftermarket & Ride Performance Company $6.4 $6.4 $595 $115 $710
 
Clean Air (Less CA AM)(1) $6.2 $4.0 $533 - -
F-M Powertrain 4.5 4.5 493 - -
Powertrain Technology Company $10.7 $8.5 $1,025 $85 $1,110
 
Pro Forma Tenneco $17.1 $14.9 $1,620 $200 $1,820
 
Note:
1. The Clean Air Aftermarket business is intended to be allocated to
the Ride Performance business.
2. Represents annual run rate synergies expected to be achieved
within 24 months.
3. Additional one time working capital synergies of at least $250M
expected.
 
   
Reconciliation of Non-GAAP Results
Adjusted EBITDA
   
$ Millions Year Ended December 31, 2017
Tenneco Federal Mogul Pro Forma
 
Net Income $274 $361 $635
Interest Expense 73 148 221
Income Tax Expense / (Benefit) 70 (190 ) (120 )
Depreciation and Amorization   224     398     622  
EBITDA $641 $717 $1,357
 
Adjustments (reflect non-GAAP(1) measures)
Restructuring and related expenses 69 37 106
Pension and post retirement charges 13 - 13
Goodwill and intangible asset impairment 11 11 22
Antitrust settlement accrual 132 - 132
Warranty settlement 7 - 7
Gain on sale of unconsolidated JV (5 ) - (5 )
Loss on debt extinguishment - 4 4
Gain on sale of assets - (7 ) (7 )
Gain from termination of customer contract - (6 ) (6 )
Warranty release - (4 ) (4 )
Release of deferred purchase price payment - (3 ) (3 )
EBITDA contribution of pending asset sales - (2 ) (2 )
  Other   -     6     6  
Adjusted EBITDA (non-GAAP Financial Measure)(2) $868 $753 $1,620
                 
 
1. Generally Accepted Accounting Principles.
2. Tenneco presents the above reconciliation of GAAP to non-GAAP
earnings measures primarily to reflect the results in a manner that
allows a better understanding of the results of operational
activities separate from the financial impact of decisions made for
the long-term benefit of the company and other items impacting
comparability between the periods. Adjustments similar to the ones
reflected above have been recorded in earlier periods, and similar
types of adjustments can reasonably be expected to be recorded in
future periods. Using only the non-GAAP earnings measures to analyze
earnings would have material limitations because its calculation is
based on the subjective determinations of management regarding the
nature and classification of events and circumstances that investors
may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above
to understand and analyze the results of the business. The company
believes investors find the non-GAAP information helpful in
understanding the ongoing performance of operations separate from
items that may have a disproportionate positive or negative impact
on the company's financial results in any particular period.
     
Reconciliation of Non-GAAP Results
Reallocation of Clean Air Aftermarket
                   
 
$ Millions Year Ended December 31, 2017
Clean Air Ride Performance Other Total
 
Total Revenue $6,517 $2,757 - $9,274
Less: Clean Air Substrates   (2,187 )   -     -     (2,187 )
Reported Value Add Revenue $4,330 $2,757 -

 

$7,087

Less: Reallocation of Clean Air AM   (302 )   302     -     -  
Value Add Revenue (post Reallocation of Clean Air AM) $4,028 $3,059 - $7,087
 
 
Adjusted EBIT $478 $255 ($86 ) $647
Plus: D&A 147 77 - 224
Less: Restructuring adjustments included in Other segment   -     -     (3 )   (3 )
Adjusted EBITDA $625 $332 ($89 ) $868
Less: Allocation of Other segment (54 ) (35 ) - (89 )
Less: Reallocation of Clean Air AM   (38 )   38     -     -  
Adjusted EBITDA (post Reallocation of Clean Air AM) (non-GAAP
Financial Measure)
(1)
$533 $335 - $868
                   
 
1. Tenneco presents the above reconciliation of GAAP to non-GAAP
earnings measures primarily to reflect the results in a manner that
allows a better understanding of the results of operational
activities separate from the financial impact of decisions made for
the long-term benefit of the company and other items impacting
comparability between the periods. Adjustments similar to the ones
reflected above have been recorded in earlier periods, and similar
types of adjustments can reasonably be expected to be recorded in
future periods. Using only the non-GAAP earnings measures to analyze
earnings would have material limitations because its calculation is
based on the subjective determinations of management regarding the
nature and classification of events and circumstances that investors
may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above
to understand and analyze the results of the business. The company
believes investors find the non-GAAP information helpful in
understanding the ongoing performance of operations separate from
items that may have a disproportionate positive or negative impact
on the company's financial results in any particular period.

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