Apollo Inks Deal to Acquire Tenneco

Apollo Inks Deal to Acquire Tenneco

Enterprise valuation of $7.1 billion represents 7.7x multiple of TTM EBITDA after capital expenditures

Tenneco sells its products under a range of well-known brands including Monroe shocks and struts and Walker exhaust systems

SOURCE: Tenneco

Publicly traded Tenneco has agreed to be acquired by Apollo in an all-cash transaction with an enterprise valuation of $7.1 billion.

Tenneco (NYSE: TEN) is a designer, manufacturer and seller of automotive products for original equipment and aftermarket customers in the light vehicle, commercial truck, off-highway, and industrial sectors.

The company operates through four business groups – Motorparts (steering, sealing, and engine parts), Ride Performance (suspension, noise and vibration technologies), Clean Air (catalytic converters and diesel oxidation catalysts), and Powertrain (pistons, cylinder liners, bearings, and spark plugs). The company sells its products under a range of well-known brands including Monroe shocks and struts and Walker exhaust systems.For the trailing twelve months, the company had revenues of more than $18.2 billion, $1.3 billion of EBITDA, and capital expenditures of $372 million. Based on an enterprise valuation of $7.1 billion this equates to a 5.5x multiple of TTM EBITDA and 7.7x multiple of TTM EBITDA after capital expenditures.

“We are pleased to have reached this agreement with Apollo, which we believe will deliver immediate and certain cash value to Tenneco shareholders at a substantial premium,” said Dennis Letham, the chairman of the board of Tenneco. “The Board’s decision follows a careful evaluation of the transaction and thoughtful and comprehensive review of value creation opportunities for Tenneco. 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’s founding dates to 1940 when it was a subsidiary of the Chicago Corporation operating as the Tennessee Gas and Transmission Company. In 1966, Tennessee Gas was renamed Tenneco and in 1999 the company’s automotive businesses were spun off as Tenneco Automotive. In 2005, the company rebranded back to Tenneco and in 2018, the company doubled in size with the buy of automotive parts giant Federal-Mogul. Another acquisition followed quickly with the 2019 buy of Sweden-based Öhlins Racing. Today, Tenneco is led by CEO Brian Kesseler and is headquartered in the Chicago suburb of Lake Forest, Illinois.

“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,” said Mr. Kesseler. “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. Specifically, this partnership will allow us to continue to invest in and grow Tenneco’s multiple segments and global footprint. This transaction is also a testament to the achievements of our global team, whose commitment and focus during these extraordinary times have enabled our success.”

“Tenneco is a key solutions provider for global mobility markets with a long-held commitment to innovation and high-quality service,” said Michael Reiss, a partner at Apollo. “We look forward to working with the Tenneco team to build on the strong foundation in place today, investing across their platform and product categories for growth and delivering innovative solutions for customers.”

New York City-headquartered Apollo (NYSE: APO) has more than $498 billion of assets under management and more than $83 billion dedicated to private equity. The firm has acquired more than 350 companies since its founding in 1990.

Lazard is the financial advisor to Tenneco and Rothschild & Co, BofA Securities and Citi are the financial advisors to Apollo.

Apollo’s agreement to acquire Tenneco has been approved by the Tenneco board of directors and is expected to close in the second half of 2022.

© 2022 Private Equity Professional | February 25, 2022

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