Remy International has agreed to sell its light and medium truck diesel engine and component remanufacturing business, conducted by Franklin Power Products and International Fuel Systems, to Caterpillar for $US150m cash.
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The deal is subject to the usual conditions and is expected to close before the end of the first quarter, 2007.
“The sale to Caterpillar represents a strategic opportunity to realise value for our stakeholders,” said Remy International president and chief executive officer John Weber.
“This acquisition represents an excellent strategic fit between Cat Reman and these two companies. It increases our overall product and service offering, and will provide a platform for future growth opportunities,” said Caterpillar vice president with responsibility for remanufacturing, Steve Fisher.
The first $50m of proceeds from the transaction will be held in a restricted account, pledged as collateral to the company’s senior lenders and available for withdrawal only with consent of the lenders under the company’s senior credit facility.
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By GlobalDataNext, the proceeds will be used to pay down outstanding revolver borrowings at the time of the closing, under a senior secured revolving credit and term loan facility, and the revolving lender commitments under the facility, currently $160m, will be reduced by $40m. Any remaining proceeds also will be held in the restricted account.
