Shares of Tenneco (NYSE:TEN) are up nearly 100% this morning after the company reported that it was being bought out by affiliates of Apollo Global Management (NYSE:APO). As part of the transaction, Apollo will purchase TEN stock in an all-cash deal for $20 per share, which reflects a 100%-plus premium from the Feb. 22 closing price. Including debt, the transaction will value Tenneco at an enterprise value of $7.1 billion. In addition, the deal is expected to close during the second half of this year. Upon closing, Tenneco will become a private entity and leave the New York Stock Exchange.
Tenneco produces automobile equipment designed to increase efficiency and comfort and reduce pollution. The company’s original equipment manufacturer (OEM) customers include Ford (NYSE:F), General Motors (NYSE:GM) and Nissan (OTCMKTS:NSANY).
As part of the transaction, Tenneco released its fourth-quarter earnings results. For the period, revenue came in at $4.4 billion, which was down 6% year-over-year (YOY). However, the revenue figure beat estimates of $4.15 billion. Tenneco CEO Brian Kesseler praised the synergy potential of the buyout:
“In Apollo, we have a partner that recognizes the strength of our product portfolio and our ability to serve leading OEM [original equipment manufacturer] and aftermarket blue-chip customers globally […] Specifically, this partnership will allow us to continue to invest in and grow Tenneco’s multiple segments and global footprint.”
What else should you know about this multi-billion dollar buyout? Let’s jump right in.
TEN Stock: 10 Things to Know About the Buyout
- In 2021, Illinois-based Tenneco reported a net loss of $35 million, compared to a net income of $167 million in 2020.
- Guidance was not disclosed due to the pending buyout.
- For full-year 2021, the company reported revenue of $18 billion, up 17% YOY.
- Furthermore, Tenneco has liquidity of $2.3 billion. Of that $2.3 billion, $865 million is cash while the remaining sum lies in “revolving credit facility.”
- Kesseler admitted that Q4 was a “challenging market and inflationary environment.”
- However, the company was able to reduce net debt and improve its net leverage ratio during the period.
- Risks to Tenneco include increases in raw material costs, labor strikes and changing laws or regulations.
- Apollo Global’s private equity arm has more than $86 billion in assets under management (AUM) and 30 years of experience.
- Since inception, Apollo has transacted with over 175 portfolio companies.
- The investment firm focuses on three principles: “buyouts, corporate carve-outs, and distressed investments.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
