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$1.9 Billion Auto Parts Merger

Auto parts maker Federal-Mogul said Tuesday it will buy Cooper Industries' automotive business for $1.9 billion in a deal that sent shares of both companies climbing.

Southfield, Mich.-based Federal-Mogul said it expects the purchase to be "modestly accretive" to earnings this year, and should add 35 cents a share in 1999 and 80 cents the year after that.

"This acquisition makes Federal-Mogul the world leader in brake friction, with over $1 billion in annual sales," said Dick Snell, Federal-Mogul chairman. "The addition of this premier manufacturer with a talented management team further strengthens Federal-Mogul's leadership position in the automotive industry."

Wall Street hailed the proposal, with shares of Federal-Mogul jumping 5 1/2 to 61 - a gain of 9.9 percent. Cooper Industries' stock gained 1 11/16 to 48 1/4.

Pending shareholder and regulatory approval, the deal is expected to close in the fourth quarter. In the subsequent 18 months, Federal-Mogul said it expects to take a charge of an estimated $55 million in pre-tax reserves for costs related to the deal and incur $23 million in integration costs.

With the Cooper Automotive transaction, Federal-Mogul has made six acquisitions and joint ventures this year, with the latest deal bringing its annual combined revenue to a projected $7 billion from $2 billion.

In 1997, Cooper Automotive's sales of brakes, lighting, chassis parts, ignition and wiper blades totaled $1.87 billion.

"This action represents another important step in the reshaping of Cooper into a higher-growth, more profitable company," Cooper chief H. John Riley Jr. said. "Our focus will be on growing our remaining electrical and tools and hardware product lines as quickly, and as profitably, as possible."

On Aug. 5, Cooper announced a $500 million stock repurchase program, now expected to be completed by the close of its automotive transaction with Federal-Mogul.

Written By Steve Gelsi