(Adds analyst comment, updates share price)
By Mridhula Raghavan
Sept 3 Federal-Mogul Holdings Corp,
controlled by billionaire investor Carl Icahn, said it would
separate its motorparts and powertrain businesses into two
publicly traded companies.
The Southfield, Michigan-based supplier said the separation
of the motorparts business, which largely caters to the
replacement market, will be in the form of a tax-free spinoff to
Icahn, known for his push to split companies, took control
of Federal-Mogul when the company emerged from bankruptcy in
Sources said in March 2011 that Icahn was trying to sell the
company, but the activist investor did not confirm the news. (reut.rs/1roRDwk)
"Upon separation, both businesses will be well-capitalized
and poised for standalone success," Chairman Icahn said in a
statement on Wednesday.
Icahn Associates Corp held about 80 percent of Federal-Mogul
as of June 30.
The company's aftermarket motorparts business, smaller of
the two, has been underperforming its powertrain business, which
makes engine bearings, pistons and transmission products.
The motorparts business booked revenue of $2.93 billion in
2013, while the powertrain had revenue of $4.17 billion.
Analyst Brian Sponheimer of Gabelli & Co said the spin-off
could attract buyers for the company's main powertrain business.
"I think one of the reasons why the company is engaging in a
tax-free spin is because the powertrains business, in my
opinion, would be an highly attractive candidate for an
acquisition," Sponheimer said.
Sponheimer named BorgWarner Inc, Continental AG
and Delphi Automotive Plc as potential
BorgWarner Chief Executive James Verrier during an earnings
call in July said the auto-parts maker's acquisitions will
generally be in technology in the powertrain area.
None of the three companies responded to emails seeking
The spin off is expected to be completed in the first half
Federal-Mogul shares were 2.5 percent higher at $17.70 in
early afternoon trading on the Nasdaq on Wednesday. The shares
had fallen 12 percent since the start of the year to Tuesday's
(Editing by Sriraj Kalluvila and Maju Samuel)