Icahn Raises Takeover Offer for Federal-Mogul to $8 a Share

  • Proposal is less than Friday’s $8.16 close for the stock
  • Billionaire could combine auto-parts maker with other units

Federal-Mogul Holdings Corp.’s largest stockholder, billionaire investor Carl Icahn, raised his bid for the remaining 18 percent of the auto-parts maker, and the shares climbed even though he didn’t offer a premium from their Friday close.

Icahn Enterprises increased its bid to $8 a share for the Southfield, Michigan-based company, from the $7 a share offered in February, according to a filing on Monday. Federal-Mogul rose 9 percent to $8.89 at 10:29 a.m. in New York. The stock closed Friday at $8.16.

Icahn is seeking to bring together three companies that deal in auto parts. His company also owns service and retail chains Pep Boys and Auto Plus, which could guarantee sales of Federal-Mogul products such as Anco wiper blades, Champion spark plugs and Wagner brake parts.

“While the bid is a step in the right direction, there’s significantly more value here,” said Brian Sponheimer, an analyst at Gabelli & Co. who has a buy rating on the stock. “Icahn knows the amount of work that this management team has done in restructuring this business over the last three years, the benefits of which the company is only beginning to see. It would certainly behoove him to buy shares below $10 when ultimately the value realization is significantly higher.”

Mario Gabelli’s Gamco is Federal-Mogul’s second-largest shareholder, with a 6.4 percent stake.

Matthew Stover, an analyst at Susquehanna Financial Group, said he doesn’t think Icahn’s “reasoning for doing anything with Federal-Mogul has anything to do with Pep Boys.” He doesn’t rate Federal-Mogul shares, and Susquehanna is a market maker for the stock.

“The history of vertically integrating a components maker and then an aftermarket distributor or aftermarket servicing agent like Pep Boys is really bad,” Stover said. “They’re fundamentally different businesses and there’s almost zero synergy.”

Icahn owns 82 percent of Federal-Mogul, whose shares rose 19 percent this year through Friday. He got a large stake in Federal-Mogul in 2007 by acquiring bonds before it exited bankruptcy and eventually converting the bonds to equity. The manufacturer canceled plans in January to spin off its motor-parts business, which was split off from the powertrain division in late 2014 in a strategy to enable acquisitions.

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