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September 07, 2016 02:00 AM

Icahn to buy remaining Federal-Mogul shares

Dustin Walsh, Crain News Service
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    (Crain News Service photo)
    Carl Icahn

    SOUTHFIELD, Mich. (Sept. 7, 2016) — Billionaire investor Carl Icahn is buying the remaining shares of Southfield-based auto supplier Federal-Mogul Corp. in a deal valued at approximately $281 million.

    Mr. Icahn, through a subsidiary of his firm Icahn Enterprises LP, entered into an agreement Sept. 6 with Federal-Mogul to acquire the remaining 18 percent of its outstanding stock. Icahn Enterprises offered to pay $9.25 per share in an all-cash deal — which represents a premium of 86 percent over supplier's share price of $4.98 on Feb. 26, when Icahn first proposed the buyout for $7 per share.

    The deal has been approved unanimously by both companies' board of directors, Federal-Mogul said. Federal-Mogul shareholders will vote to approve the transaction at an undetermined future date.

    Upon approval, Federal-Mogul will become a privately held subsidiary of Icahn Enterprises and no longer be traded on the NASDAQ.

    The bid to buy the minority stake comes after Federal-Mogul scrapped its plan in January to split the company into two separate public entities. Company officers pointed to market conditions as the culprit behind its decision not to split its aftermarket parts division from its powertrain division.

    In December, Mr. Icahn won a $1.03 billion bidding war over Bridgestone Americas for auto parts retail chain Pep Boys – Manny, Moe & Jack. Experts said they believe Mr. Icahn plans to use the parts retailer as a mainline for Federal-Mogul parts but fear his vertical integration strategy will hurt the company over the long term.

    Pep Boys' 800 stores, paired with Icahn's other aftermarket retailer, the 278-location Auto Plus, would make up the fifth-largest retail auto parts chain in the U.S. Even with the Pep Boys stores, Auto Plus would be significantly smaller than rivals Advance Auto Parts Inc., Autozone Inc. and O'Reilly Automotive Inc.

    It's unclear whether Mr. Icahn's taking full control of Federal-Mogul would expedite that process.

    Federal-Mogul shares traded at $9.24 in midday trading on Sept. 6.

    ____________________________________

    This story first appeared on the website of Crain's Detroit Business a sister publication of Tire Business.

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