Icahn to Buy Federal-Mogul, Take Auto-Parts Supplier Private

  • Increased bid allows integration with Pep Boys, Auto Plus
  • Move comes hours after VW joined him in holding Navistar

Carl Icahn

Photographer: Victor J. Blue/Bloomberg

Federal-Mogul Holdings Corp. agreed to a sweetened bid from billionaire investor Carl Icahn to buy the remaining shares of the maker of Champion spark plugs, as he seeks to unify companies that manufacture and retail auto parts.

The offer announced Tuesday, at $9.25 a share, is 86 percent more than Southfield, Michigan-based Federal-Mogul’s close of $4.98 on Feb. 26, the last trading day before Icahn Enterprises’ original proposal of $7. The investor, who already holds almost 82 percent of the stock, increased his proposal to $8 in June.

Icahn, who would pay about $282 million based on Federal-Mogul’s shares outstanding, is seeking to bring together three companies that deal in auto parts. His investment firm also owns service and retail chains Pep Boys and Auto Plus, which could guarantee sales of Federal-Mogul products such as Anco wiper blades and Wagner brake parts. Federal-Mogul, like the two retailers, would become a closely held company.

“Icahn is trying to capture the entire vertical set of margins in that business, from Federal Mogul through the retail outlets and all the way down to the consumer,’’ said Richard Hilgert, a Morningstar Inc. analyst in Chicago. “He’s playing on the fact that we’ve got a vehicle population that’s aging and getting bigger, plus the fact that people are driving more. All this means more auto parts.’’

Federal-Mogul fell 0.3 percent to $9.21 at 1:35 p.m. in New York.

Earlier on Tuesday, Volkswagen AG announced that it was buying stake in Navistar International Corp., the U.S. heavy-truck maker that lists Icahn as its largest shareholder. The investment puts Europe’s largest automaker on equal footing with Icahn and Mark Rachesky, another activist, at the Lisle, Illinois-based company.

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