LAKE FOREST, Ill. — Tenneco Inc. disclosed further details about the structure of its company following the completion of its proposed deal to acquire Federal-Mogul L.L.C.
The $5.4 billion deal is expected to close in the second half of this year, subject to regulatory approvals. Once complete, Tenneco said it plans to create two separate publicly traded companies — one focused on replacement auto parts and the other on powertrain technology. That is projected to occur in the second half of 2019.
At a May 17 shareholders meeting, Tenneco said it anticipates the aftermarket and ride performance firm would be the spun off company because it would be the smaller of the two, and also represents lower refinancing costs.
The spun off company will enter into new financing arrangements prior to the spin with an expected net debt to adjusted EBITDA leverage ratio about 3x when the companies separate. The leverage target for the aftermarket and ride performance company is between 1.5x and 2x.
Tenneco also anticipates the powertrain technology company would retain the existing combined company debt structure. It is expected that some or all of the existing Federal-Mogul bonds will be refinanced with proceeds from the aftermarket and ride performance company financing transactions. The remaining company is anticipated to have a leverage ratio of about 2.3x when the businesses are separated, with a goal to reduce leverage to between 1x and 1.5x.
Previously, a Tenneco spokesman said via email that the headquarters for each company likely are to remain in the Detroit and Chicago areas, but a decision on which one would go where has not been made.
It was also noted that the aftermarket company will consists of about $6.4 billion in sales while the powertrain technology supplier accounts for $10.7 billion.
Tenneco ranks No. 31 on the Automotive News list of the top 100 global suppliers with worldwide sales to auto makers of $7.35 billion in 2016. The firm had $9.27 billion in net sales and operating revenue in 2017. The company reported net income of $274 million. Together, General Motors Co. and Ford Motor Co. comprised more than a quarter of the company's 2017 sales.
Federal-Mogul ranks No. 46 on that list, with estimated sales to auto makers of $5.16 billion in 2016. Overall Federal-Mogul had $7.43 billion in net sales in 2016 and $82 million in net income, the latest year available. In 2015 it had a $110 million loss, and a $168 million loss in 2014.
None of Federal-Mogul's customers in 2016 accounted for more than 10 percent of its overall revenue, the company said in its annual report.
Dustin Walsh, Crain's Detroit Business, contributed to this report.