LAKE FOREST, Ill., Jan. 27, 2020 /PRNewswire/ -- Tenneco Inc.
(NYSE: TEN) (the "Company") today reconfirmed that it has been
reviewing strategic alternatives to maximize shareholder value and
announced the addition of Lazard to its existing advisor team as an
independent financial advisor. In consultation with its advisors,
Tenneco is reviewing and considering, in addition to the current
plan to spin off the Company's Aftermarket and Ride Performance
business ("DRiV"), a full range of strategic options including the
sale of DRiV and/or the Company's Powertrain Technology business
("New Tenneco"). Transactions involving other individual product
lines in the portfolio are also under consideration.
The Company also announced that it is committed to adding at
least one new independent director over the course of 2020 as part
of its ongoing Board refreshment process. This follows the recent
addition of two new independent directors. The Board will focus on
identifying candidates who will bring additional skills and
experience relevant to Tenneco's strategy and operations, as well
as with respect to strategic transactions. Tenneco noted that its
Board is comprised of 10 highly qualified directors, eight of whom
are independent and all of whom are seasoned leaders committed to
driving shareholder value.
Gregg M. Sherrill, Chairman of
the Tenneco Board, said, "The addition of Lazard to our existing
advisor team will add a fresh perspective in our assessment of
strategic alternatives. Further, the Board is committed to
best practices in corporate governance, and we will continue to
refresh its membership with individuals who have the skill sets to
help us achieve our strategic and operational
objectives."
As previously announced on January 7,
2020, the Company is implementing a plan to accelerate the
reduction of operational costs, improve cash flow performance,
reduce leverage, and better position DRiV and New Tenneco for the
planned separation. Tenneco has made significant progress to
facilitate the planned spin-off of DRiV and has substantially
completed all necessary system and process components required for
New Tenneco and DRiV to operate independently.
Tenneco today also updated enterprise full year 2019 guidance
for key financial targets. As compared to the full year guidance
provided on the Company's Q3 earnings release on October 31, 2019, the expectation for full year
2019 revenues is slightly higher than previously stated guidance.
Additionally, adjusted EBITDA, capital expenditures,
depreciation/amortization, interest expense and the net leverage
ratio are all expected to be in line with previously stated
guidance.
Tenneco set its 2019 Q4 and full year earnings release for
February 20, 2020. The Company plans
to provide a full report of its fourth quarter and full year 2019
results, 2020 guidance and details on its performance acceleration
plan.
Brian Kesseler, CEO of Tenneco,
said, "Tenneco is building its operational performance acceleration
plan off the success of the integration process executed through
the end of 2019. The actions from this process yielded better than
planned savings, which were delivered ahead of schedule. Our
acceleration plan, coupled with our momentum built in 2019, will
help to mitigate headwinds from the volatile conditions in the end
markets we serve."
Advisors
Lazard and Barclays are serving as financial
advisors to Tenneco and Kirkland & Ellis LLP is serving as
legal counsel.
There can be no assurance that the review of strategic
alternatives will result in a transaction or other strategic change
or outcome. The Company does not intend to provide updates unless
or until it determines that further disclosure is appropriate or
necessary.
About Tenneco
Headquartered in Lake Forest, Illinois, Tenneco is one of the
world's leading designers, manufacturers and marketers of
Aftermarket, Ride Performance, Clean Air and Powertrain products
and technology solutions for diversified markets, including light
vehicle, commercial truck, off-highway, industrial and the
aftermarket, with 2018 pro-forma revenue of $17.8 billion and approximately 81,000 employees
worldwide. On October 1, 2018,
Tenneco completed the acquisition of Federal-Mogul, a leading
global supplier to original equipment manufacturers and the
aftermarket. Additionally, the company expects to separate
its businesses to form two independent companies, an Aftermarket
and Ride Performance company as well as a Powertrain Technology
company.
About the new Tenneco - the future Powertrain Technology
company
Following Tenneco's expected separation to form two
independent companies, an Aftermarket and Ride Performance company
(DRiV™), as well as a new Powertrain Technology company, the new
Tenneco will be one of the world's largest pure-play powertrain
companies serving OE markets worldwide with engineered solutions
addressing fuel economy, power output, and criteria pollution
requirements for gasoline, diesel and electrified powertrains. The
new Tenneco would have 2018 pro-forma revenues of $11.4
billion, serving light vehicle, commercial truck, off-highway and
industrial markets.
About DRiV™ - the future Aftermarket and Ride Performance
company
Following the expected separation of Tenneco to form two
independent companies, an Aftermarket and Ride Performance company
(DRiV™) as well as a new Powertrain Technology company, DRiV will
be one of the largest global multi-line, multi-brand aftermarket
companies, and one of the largest global OE ride performance and
braking companies. DRiV's principal product brands will feature
Monroe®, Ӧhlins®, Walker®, Clevite® Elastomers, MOOG®, Fel-Pro®,
Wagner®, Ferodo®, Champion® and others. DRiV would have 2018
pro-forma revenues of $6.4 billion, with 54% of those revenues
from aftermarket and 46% from original equipment customers.
Forward-Looking Statements
This press release contains forward-looking statements. The
words "may," "will," "believe," "should," "could," "plan,"
"expect," "anticipate," "estimate," and similar expressions (and
variations thereof), identify these forward-looking
statements. Any statements that refer to outlook,
expectations, or other characterizations of future events,
circumstances, or results, are also forward-looking
statements. These forward-looking statements are based on the
current expectations of the Company (including its subsidiaries).
Because these statements involve risks and uncertainties, actual
results may differ materially from the expectations expressed in
the forward-looking statements. Important factors that could cause
actual results to differ materially from the expectations reflected
in the forward-looking statements include:
- general economic, business and market conditions;
- our ability to source and procure needed materials,
components and other products and services in accordance with
customer demand and at competitive prices;
- the cost and outcome of existing and any future claims,
legal proceedings or investigations, including, but not limited to,
any of the foregoing arising in connection with the ongoing global
antitrust investigation, product performance, product safety or
intellectual property rights;
- changes in consumer demand, prices and our ability to have
our products included on top selling vehicles, including any shifts
in consumer preferences away from historically higher margin
products for our customers and us, to other lower margin vehicles,
for which we may or may not have supply arrangements, and the
cyclical nature of the global vehicle industry, including the
performance of the global aftermarket sector;
- changes in consumer demand for our original equipment
products or aftermarket products, or changes in automotive and
commercial vehicle manufacturers' production rates and their actual
and forecasted requirements for our products, due to difficult
economic conditions and/or regulatory or legal changes affecting
internal combustion engines and/or aftermarket products;
- our dependence on certain large customers, including the
loss of any of our large original equipment manufacturer customers
(on whom we depend for a substantial portion of our revenues), or
the loss of market shares by these customers if we are unable to
achieve increased sales to other customers or any change in
customer demand due to delays in the adoption or enforcement of
worldwide emissions regulations;
- new technologies that reduce the demand for certain of our
products or otherwise render them obsolete;
- our ability to introduce new products and technologies that
satisfy customers' needs in a timely fashion;
- the overall highly competitive nature of the automotive and
commercial vehicle parts industries, and any resultant inability to
realize the sales represented by our awarded book of business
(which is based on anticipated pricing and volumes over the life of
the applicable program);
- changes in capital availability or costs, including
increases in our cost of borrowing (i.e., interest rate increases),
the amount of our debt, our ability to access capital markets at
favorable rates, and the credit ratings of our debt;
- our ability to comply with the covenants contained in our
debt instruments;
- our working capital requirements;
- our ability to successfully execute cash management and
other cost reduction plans, and to realize the anticipated benefits
from these plans;
- risks inherent in operating a multi-national company,
including economic conditions, such as currency exchange and
inflation rates, and political conditions in the countries where we
operate or sell our products, adverse changes in trade agreements,
tariffs, immigration policies, political stability, and tax and
other laws, and potential disruptions of production and
supply;
- increasing competition from lower cost, private-label
products;
- damage to the reputation of one or more of our leading
brands;
- the effect of improvements in automotive parts on
aftermarket demand for some of our products;
- industrywide strikes, labor disruptions at our facilities or
any labor or other economic disruptions at any of our significant
customers or suppliers or any of our customers' other
suppliers;
- developments relating to our intellectual property,
including our ability to adapt to changes in technology;
- costs related to product warranties and other customer
satisfaction actions;
- the failure or breach of our information technology systems,
including the consequences of any misappropriation, exposure or
corruption of sensitive information stored on such systems and the
interruption to our business such failure or breach may
cause;
- the effect of consolidation among vehicle parts suppliers
and customers on our ability to compete in the highly competitive
automotive and commercial vehicle supplier industry;
- changes in distribution channels or competitive conditions
in the markets and countries where we operate;
- the evolution towards autonomous vehicles and car and ride
sharing;
- customer acceptance of new products;
- our ability to successfully integrate, and benefit from, any
acquisitions we complete;
- our ability to effectively manage our joint ventures and
other third-party relationships;
- the potential impairment in the carrying value of our
long-lived assets, goodwill, or indefinite-lived intangible assets
or our inability to realize our deferred tax assets;
- the negative effect of fuel price volatility on
transportation and logistics costs, raw material costs,
discretionary purchases of vehicles or aftermarket products, and
demand for off-highway equipment;
- increases in the costs of raw materials or components,
including our ability to successfully reduce the effect of any such
cost increases through materials substitutions, cost reduction
initiatives, customer recovery, and other methods;
- changes by the Financial Accounting Standards Board or the
Securities and Exchange Commission of authoritative generally
accepted accounting principles or policies;
- changes in accounting estimates and assumptions, including
changes based on additional information;
- any changes by the International Organization for
Standardization (ISO) or other such committees in their
certification protocols for processes and products, which may have
the effect of delaying or hindering our ability to bring new
products to market;
- the effect of the extensive, increasing, and changing laws
and regulations to which we are subject, including environmental
laws and regulations, which may result in our incurrence of
environmental liabilities in excess of the amount reserved or
increased costs or loss of revenues relating to products subject to
changing regulation;
- potential volatility in our effective tax rate;
- disasters, such as fires, earthquakes and flooding, and any
resultant disruptions in the supply or production of goods or
services to us or by us, in demand by our customers or in the
operation of our system, disaster recovery capabilities or business
continuity capabilities;
- acts of war and/or terrorism, as well as actions taken or to
be taken by the United States and
other governments as a result of further acts or threats of
terrorism, and the effect of these acts on economic, financial, and
social conditions in the countries where we operate;
- pension obligations and other postretirement
benefits;
- our hedging activities to address commodity price
fluctuations; and
- the timing and occurrence (or non-occurrence) of other
transactions, events and circumstances which may be beyond our
control.
In addition, this release includes forward-looking statements
regarding the Company's ongoing review of strategic alternatives
and the planned separation of the Company into a powertrain
technology company and an aftermarket and ride performance
company. Important factors that could cause actual results to
differ materially from the expectations reflected in the
forward-looking statements include:
- the ability to identify and consummate strategic
alternatives that yield additional value for shareholders;
- the timing, benefits and outcome of the Company's strategic
review process;
- the structure, terms and specific risk and uncertainties
associated with any potential strategic alternative;
- potential disruptions in our business and stock price as a
result of our exploration, review and pursuit of any strategic
alternatives;
- the risk the Company may not complete a separation of its
powertrain technology business and its aftermarket and ride
performance business (or achieve some or all of the anticipated
benefits of the separation);
- the risk the combined company and each separate company
following the separation will underperform relative to our
expectations;
- the ongoing transaction costs and risk we may incur greater
costs following separation of the business;
- the risk the spin-off is determined to be a taxable
transaction;
- the risk the benefits of the acquisition of Federal-Mogul,
including synergies, may not be fully realized or may take longer
to realize than expected;
- the risk the acquisition of Federal-Mogul may not advance
our business strategy;
- the risk we may experience difficulty integrating or
separating employees or operations; and
- the risk the transaction may have an adverse effect on
existing arrangements with us, including those related to
transition, manufacturing and supply services and tax matters; our
ability to retain and hire key personnel; or our ability to
maintain relationships with customers, suppliers or other business
partners.
The Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after
the date of this press release. Additional information regarding
these risk factors and uncertainties is, and will be, detailed from
time to time in the company's SEC filings, including but not
limited to its annual report on Form 10-K for the year ended
December 31, 2018.
Investor inquiries:
Linae
Golla
847-482-5162
lgolla@tenneco.com
Rich Kwas
248-849-1340
rich.kwas@tenneco.com
Media inquiries:
Bill
Dawson
847-482-5807
bdawson@tenneco.com
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SOURCE Tenneco Inc.