Carl Icahn to sell Federal-Mogul to Tenneco for $5.4 billion

Almost after a decade after acquiring a major stake in auto-parts maker Federal-Mogul, billionaire activist Carl Icahn has decided to sell the unit to its rival Tenneco (TEN) for $5.4 billion.

Tenneco witnessed a rise in its share on the news that it entered into a definitive agreement to acquire Federal-Mogul from Icahn Enterprises L.P. (IEP).  Ichan, who has been at the center of insider trading allegations for selling his $30 million stake in crane maker Manitowac just before Trump’s tariff announcement, will have 36% of Tenneco’s voting stock.

According to Bloomberg, Icahn sold the unit — whose products include brake parts, wipers blades, and spark plugs — because Federal-Mogul customer’s highlighted that Icahn played the role of both a supplier and a competitor with the auto-related holdings.

Just last year, the investor had acquired the complete ownership in the Southfield-based company in a deal valued at approx.. $300 million and then returned it to a privately held firm. Prior to this, Icahn had just 82% ownership in Federal-Mogul.

The deal  — which will be funded through cash, Tenneco equity and assumption of debt– is expected to close later this year and is expected to offer a great value to shareholders.

Post the deal, Tenneco – which sells its products under brand names Gillet and Walker — plans to segregate the joined entities into two publicly traded companies, and this process is due in 2019. The deal is expected to produce a synergy of approx. $200 million in annual earnings. This is the latest deal in the auto supplier industry that is currently undergoing a stage of transition.

Icahn has recently been heavily investing in transportation-related assets including ride-sharing company Lyft Inc, and Hertz Global Holdings Inc. – a rental car provider.  But the latest move is a deviation from Icahn’s vision of having a major control over the replacement parts business.