Tenneco to be acquired by private equity firm

LAKE FOREST, Ill.—Tenneco Inc. is going private.

The Lake Forest-based auto parts maker said Feb. 23 that it had agreed to an acquisition by private equity firm Apollo Global Management Inc. in an all-cash transaction with an enterprise value of $7.1 billion, including debt.

The purchase price ($20 per share), Tenneco said, represents a 100.4-percent premium over the Feb. 22 closing share price of $9.98. It also represents a 71.6-percent premium over the Tenneco's unaffected 90-day VWAP. By 1:30 p.m. EST on Feb. 23, Tenneco's stock already had risen $9.30 a share, to $19.28.

Rumors of the marriage between Tenneco and Apollo go back at least two years. Crain's Detroit Business reported in January 2020 that the private equity firm had made a $4.3 billion offer for Tenneco's powertrain unit.

At the time, it was unclear whether Tenneco's board would seriously consider the offer.

Dennis Letham, chairman of the board of Tenneco, said the decision to sell the company to Apollo was not taken lightly.

"The board's decision follows careful evaluation of the transaction and thoughtful and comprehensive review of value creation opportunities for Tenneco," he said in a statement. "We believe this transaction is the right path forward and achieves our goal of maximizing value for Tenneco shareholders, and will benefit our team members, customers and business partners around the world."

Tenneco CEO Brian Kesseler noted that the changing automotive landscape makes this the perfect time for Tenneco to transition as a company and join with Apollo. The move, he said, allows for Tenneco to grow its multiple segments globally.

"Over the last several years, Tenneco has transformed its business to succeed in today's environment. This transaction marks a significant milestone and will provide us with a new and exciting platform from which we can continue our global strategy in an evolving and dynamic mobility landscape," Kesseler said. "In Apollo, we have a partner that recognizes the strength of our product portfolio and our ability to serve leading OEM and aftermarket blue-chip customers globally."

In a separate release issued Feb. 23, Tenneco reported its fourth quarter and full-year financial results. The company saw a net loss of $35 million for the fourth quarter of 2021, down significantly from the $167 million net income for the same quarter in 2020. Sales for the quarter were $4.30 billion, compared to $4.65 billion in the final three months of 2020.

Even with the difficult fourth quarter, however, Tenneco reported revenue growth of 17 percent for 2021 compared to the previous year, recording $18 billion in revenue and value-added revenue of $13.7 billion.

Net income for the full-year fiscal year 2021 was $35 million, marking a reversal from a $1.52 billion loss in 2020.

Looking back

Tenneco faced a rocky road after the acquisition of its competitor Federal-Mogul L.L.C. in 2018. The $5.4 billion deal, finalized on Oct. 1, 2018, created a combined company with an estimated $17.1 billion in sales.

Following the Federal-Mogul purchase, Tenneco, which also operates the Clevite elastomers business, had planned to split into two publicly traded companies—one a $6.4 billion replacement automotive parts company and the other a $10.7 billion powertrain technology firm.

A year later, Tenneco dubbed the spin-off company Driv Inc., saying it would operate as a catalog of well-known brand names, five of which were more than a century old. The product lines would include Monroe, Champion, Oehlins, Moog, Walker, Fel-Pro, Wagner, Ferodo, Thrush, National, Sealed Power and Axios. The aim was to spin off the company in 2020.

Things, however, didn't go as planned. The spin-off was delayed due to unfavorable conditions. In addition to the global pandemic, Tenneco was hit by the General Motors labor strike in 2019 and a softening of the auto market in China that same year.

At the same time Tenneco was working to stabilize its finances and prepare for the Driv spin-off, activist shareholder Daniel Ninivaggi was pressuring the company to make significant changes to its leadership.