Tenneco Buys Federal-Mogul in $5.4 Billion Deal

Auto parts supplier Tenneco Inc. has agreed to buy Southfield, Mich.-based Federal-Mogul Corp. in a purchase worth $5.4 billion.

Tenneco, a $9.3 billion company based in Lake Forest, Ill., says it intends to split its own operations and those of Federal-Mogul into two businesses: powertrain components and auto parts. Each new entity will be spun off in 2019 to shareholders as publicly traded companies.

The acquisition involves $800 million in cash, a combined 29.5 million shares in Tenneco and assumption of debt. The deal is expected to be completed in the second half of 2018.

Federal-Mogul, which emerged from bankruptcy in 2007, has been controlled by long-time investor Carl Icahn’s Icahn Enterprises LP since 2008. He says he plans to continue as a “meaningful stockholder” of Tenneco.

The new powertrain company will consists of Tenneco’s Clean Air product line and Federal-Mogul’s powertrain unit. The components company will comprise Tenneco’s Ride Performance operations and Federal-Mogul’s Motorparts aftermarket business.