Apollo Will Take Parts Supplier Tenneco Private

Business Wire via AP

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Tenneco Inc. agreed to be acquired by affiliates of Apollo Global Management Inc., taking the auto parts supplier out of the public market after years of share declines and business upheaval.

Apollo will pay $20 a share, about twice Tenneco’s Feb. 22 closing price, the companies said Feb. 23 in a statement. Based on the number of shares outstanding, the cash transaction has an equity value of about $1.6 billion. The companies valued the deal at $7.1 billion including debt.

The sale wraps a tumultuous stretch for Tenneco, which has endured activist investor pressure, board shakeups and an 85% drop in the stock price over the past five years. More recently, semiconductor shortages caused by the pandemic have wreaked havoc on the automotive industry.

The Lake Forest, Ill.-based supplier of mufflers and other car parts will continue to operate under the Tenneco brand following the deal, the companies said. “This partnership will allow us to continue to invest in and grow Tenneco’s multiple segments and global footprint,” Tenneco CEO Brian Kesseler said in the statement.

The deal, which has been unanimously approved by Tenneco’s board, is expected to close in the second half of the year.

Separately, Tenneco on Feb. 23 reported an adjusted loss of 11 cents a share in the fourth quarter, well short of Wall Street’s expectations. Sales of $4.39 billion exceeded the average of analysts’ estimates compiled by Bloomberg.

Tenneco shares soared 94% in early-morning trading in New York. Apollo shares climbed 1.3%.

The Apollo deal marks the latest twist in Tenneco’s saga. The company agreed in 2018 to acquire Federal-Mogul, a rival parts manufacturer backed by activist Carl Icahn, for $5.4 billion with the intention of subsequently breaking the company apart. That plan was upended by deep strains in Tenneco’s business, leading to the resignation of co-CEO Roger Wood in early 2020.

Around the same time, Dan Ninivaggi, a former Icahn Automotive Group executive, called for sweeping board changes, cash-raising steps and a possible sale of the company. In a January 2020 letter to the board, he said Tenneco “has never created a penny of shareholder value.” The stock has been on a steady slide from the mid-$60s in 2017 and early 2018.

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