Tenneco Sells Unit For $2B
sells unit for $2.2 billion Misses profits estimate and takes $100 million charge
By Emily Church, CBS MarketWatch
NEW YORK (CBS.MW) -- Tenneco on Tuesday said it would sell its containerboard business to an investment firm for $2 billion in cash and keep an equity stake valued at another $200 million.
The auto parts and specialty packaging maker (TEN) indicated it would use the cash to pay down $2 billion of debt. The business is being sold to Madison Dearborn Partners, a private firm. Tenneco keeps a 45 percent stake in the containerboard business.
In a conference call after the earnings, CEO Dana Mead termed the sale "an enabling event." The move will allow Tenneco to reduce its debt load to a total $2.5 billion ahead of plans that may include spinning off its specialty packaging and/or its automotive parts business.
"Our goal is to create a specialty packaging business and automotive business, whether they be independent, IPOs... or whatever," he said. "This enables (Tenneco) to take on additional debt on the Tenneco balance sheet and create a host of attractive and viable alternatives for Tenneco automotive and Tenneco specialty and protective packaging."
Tenneco announced its intentions to consider alternatives for its businesses last July. After the containerboard deal closes in 60-90 days, the two businesses will be the only busineses left for Tenneco.
Tenneco also on Tuesday posted operating income of $98 million in the fourth quarter against $102 million a year ago amid weak automotive aftermarket sales. Net income for the period was 2 cents a share, against 44 cents a year ago. Analyst surveyed by First Call had estimated earnings of 8 cents a share.
Tenneco's stock was down 1/4 to 33 1/8. The company said it would take a $100 million charge for restructuring and overhead cost reduction that it expects to lead to annual savings of $135 million. See press release.
Mead indicated that conditions for the automotive aftermarket will be "challenging through 1999," yet he added that sales into wholesale chain may increase. He said in a statement that he had a "very optimistic outloo" for specialty packaging.
Written By Emily Church, CBS MarketWatch