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Tenneco Is Buying Federal-Mogul From Icahn for $5.4 Billion

Icahn Enterprises L.P., the parent company of Icahn Automotive Group LLC, is selling Federal-Mogul LLC to Tenneco Inc. for $5.4 billion. Tenneco plans to split Federal-Mogul into two entities.

Federal-Mogul is an indirect wholly owned subsidiary of Icahn Enterprises. The selling prices is comprised of $800 million in cash and 29.5 million shares of Tenneco common stock, of which 23.8 million shares will be non-voting shares that will convert to voting shares if and when sold.

Icahn said there will there will be restrictions on how much Tenneco stock can be sold within the first 150 days after the closing. Under the agreement, Tenneco can reduce the amount of non-voting common stock by up to 7.3 million shares and increase the cash consideration proportionately at the closing. The voting and non-voting shares of Tenneco common stock will have the same economic value. Tenneco will also assume all debt of Federal-Mogul.

Tenneco will create 2 new companies

In connection with the sale, Tenneco announced its intention to separate the combined businesses into two independent, publicly traded companies through a tax-free spin-off to its stockholders that will establish an aftermarket and ride performance company and a powertrain technology company.

The sale is expected to close in the second half of 2018, subject to regulatory approvals, approval by Tenneco stockholders and other customary closing conditions, with the separation anticipated to occur in the second half of 2019. The sale is not subject to any financing condition.

In a statement released by Icahn Enterprises, company chairman Carl Icahn 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. This transaction is an excellent example of our general modus operandi at Icahn Enterprises, by which we seek to acquire undervalued assets, nurture, guide and improve their condition and operations, and ultimately develop them into more valuable businesses, which greatly enhances value for all shareholders.”

Tenneco CEO Brian Kesseler stated: “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.

“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.”

XMS Capital Partners is acting as exclusive financial advisor and Winston & Strawn LLP is acting as legal counsel for Icahn Enterprises and Federal-Mogul in connection with the sale.

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