Icahn to gain full control of Federal-Mogul with $300 million deal

by admin January 20, 2017 at 11:14 am

Carl Icahn previously owned 82 percent of the Federal-Mogul shares. Photo credit: Reuters

Billionaire investor Carl Icahn, after nearly a year of posturing with Federal-Mogul’s shareholders, will take full ownership of the diversified auto parts supplier in a roughly $300 million deal.

Icahn Enterprises LP, through his indirect wholly-owned subsidiary IEH FM Holdings LLC, sealed the deal after Federal-Mogul’s second-largest shareholder Gabelli Asset Management Company Investors tendered 7 million shares to Icahn, providing enough shares to take over the public company outright, Bloomberg reported.

Icahn previously owned 82 percent of the Federal-Mogul shares.

The deal, announced Thursday by Icahn Enterprises, ends a near yearlong quest for Icahn to acquire the supplier, known for its arsenal of aftermarket brands such as Anco wiper blades, Champion spark plugs and Wagner brakes. 

On Jan. 3, Icahn offered $10 per share, up from a previous offer of $9.25 per share, to acquire the remaining shares

Last February, Icahn entered into a definitive agreement to acquire the remaining shares, offering $7 per share, then upped the bid to $8 per share in June. By September, Icahn upped the bid again to pay $9.25 per share in an all-cash deal, which represented an 86 percent premium on the supplier’s share price of $4.98 on Feb. 26, when Icahn first proposed the buyout.

The bid comes after Federal-Mogul scrapped its plan in January 2015 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 2015, Icahn won a $1.03 billion bidding war for auto parts retail chain Pep Boys. Experts believe 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 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 Icahn taking full control of Federal-Mogul would expedite that process.

Federal-Mogul (NASDAQ: FDML) shares traded at $10.01, just above Icahn’s offer, in Thursday’s morning trading.

The supplier, based north of Detroit in Southfield, Mich., ranks No. 47 on the Automotive News list of the top 100 global suppliers with estimated worldwide sales to automakers of $5.1 billion in 2015.

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