Federal-Mogul plans to separate its powertrain and motorparts divisions into two independent, publicly-traded companies serving the global original equipment and aftermarket industries.
The planned separation will be implemented through a tax-free distribution of the motorparts division to shareholders.
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“By separating the powertrain and motorparts divisions we are creating two independent, market-leading companies that will be among the largest and strongest in their respective peer groups globally,” Federal-Mogul chairman Carl Icahn said in a statement.
“Upon separation, the newly formed motorparts will have a strong balance sheet with access to large amounts of capital enabling it to pursue synergistic acquisitions in the highly fragmented aftermarket industry. In addition, the remaining powertrain business will benefit from enhanced management focus and the allocation of resources more directly aligned with its strategic priorities. Upon separation both businesses will be well-capitalised and poised for stand-alone success,” he added.
“Since creating the motorparts division in 2012, we have made solid progress in developing and implementing a strategic plan to take advantage of the growing and increasingly complex global car parc,” said Daniel Ninivaggi, co-CEO, Federal-Mogul and CEO, motorparts.
“The structure of the separation will provide motorparts with enhanced financial and operating flexibility to pursue growth and consolidation opportunities, while preserving our access to the world-class technology and product expertise that resides within [the] powertrain division.”
“The powertrain division… will continue to grow organically based upon our superior offerings. We will also pursue market opportunities to expand our scope, size and footprint, focusing on core components for combustion engines that offer a strong strategic fit with our existing portfolio,” said Rainer Jueckstock, co-CEO, Federal-Mogul and CEO, powertrain.
Completion of the transaction is subject to the usual conditions, including among others, Federal-Mogul’s receipt of an IRS ruling or lawyer’s opinion to the effect that the distribution will qualify as a transaction that is generally tax-free for US federal income tax purposes. A regulatory filing with the SEC also must be done.
“No assurances can be given regarding the ultimate timing of the separation or that it will be consummated, however the company’s objective is to complete the spin-off of Federal-Mogul motorparts in the first half of 2015,” the statement said.
