Tenneco Separates Packaging and Automotive
29 April 1999
Tenneco Separates Packaging and Automotive, Creating Two Stand-Alone Companies
GREENWICH, Conn.--April 29, 1999--Tenneco Inc., today announced that its board of directors has approved the separation of its automotive and packaging businesses into two independent companies.The transaction will involve a tax-free spinoff to Tenneco shareowners, creating a new packaging company and an automotive parts company with expected 1999 sales of $3 billion and $3.2 billion, respectively. The action will effectively complete the final phase of restructuring Tenneco announced in 1998 and the corporate transformation started in 1992.
"When the actions announced today are completed, we will put the last part of the Tenneco transformation into place," said Tenneco Chairman and Chief Executive Officer Dana G. Mead. "Beginning with the restructuring of J.I. Case and the subsequent IPOs, spins and mergers of Case, Newport News Shipbuilding, Tenneco Energy, and Albright & Wilson Chemicals, we have consistently pursued actions to eliminate the conglomerate discount, create strong independent businesses and enhance shareowner interests.
"We will have completed seven major strategic actions, all on a tax-effective basis for our shareowners, reduced debt by more than $8 billion, and built the industry leading companies we are separating today," he said.
"Since last summer, we have explored a wide range of strategic options for our Packaging and Automotive businesses," he said. "We are convinced that the division of Tenneco into two separate companies has the potential to generate the greatest short and long-term value in those businesses, and will be consistent with our successful past strategic actions."
Packaging
The new packaging business goes forward as one of the world's leading businesses of its kind - among the most diversified and profitable specialty packaging businesses, making and selling products for the foodservice, consumer, protective, flexible, and institutional/industrial markets. "The spinoff of packaging creates a financially strong and growing $3 billion business with an array of products, strong brands, leading market positions, and a global presence," Mead said.
Tenneco built the specialty packaging business from $555 million in sales in 1995 to $2.8 billion in 1998 through internal growth and strategic acquisitions. With leading consumer brand names and market positions with its Hefty(R), Baggies(R), OneZip(R), E-Z Foil(R), and other consumer products, the packaging company "will strategically expand worldwide and target international markets with high growth potential," Mead said. "We plan to continue exceeding industry growth rates in the fast-growing foodservice, protective and flexible packaging markets."
In addition to its well-known consumer brands, the new packaging company's products include molded fiber packaging and disposable aluminum, foam and clear plastic food containers, as well as protective packaging for the electronic, furniture and automotive industries, polyethylene bags, medical devices, and industrial stretch wrap. The new packaging company also will hold the 45 percent equity stake in Tenneco's former containerboard business, Packaging Corporation of America.
The new packaging company is among the world's largest suppliers to the food service industry and also to the fast-growing home meal replacement market. It has demonstrated solid margins and profitability and has an excellent track record of integrating acquisitions.
Automotive
The automotive business continues as one of the world's leading makers of ride control and exhaust products, with powerful brand names, advanced product lines, strong market positions, and a growing book of original equipment (OE) business.
The automotive company supplies parts and systems to virtually every original equipment manufacturer in the world, and in the replacement parts market produces nearly three of every ten mufflers and almost half of all shock absorbers installed worldwide. The company manufactures and markets Walker(R) exhaust products, the world's leading exhaust systems, and Monroe(R) ride control products, the world's best known name in shocks and struts.
"The new automotive company will accelerate its aggressive growth plan with OEMs around the world by continuing to grow as a Tier One supplier, and expanding its capabilities to provide modular and systems solutions," Mead said. "In the replacement market, the new company will build on the quality reputations of Monroe(R), Walker(R), Rancho(R) and other brands.
"The automotive company has the financial strength, dynamic management, global reach and systems compatibility to grow as a world leader," Mead said.
The spin-off and separation of the packaging and automotive companies, including all approvals, should be completed in the fall.
Both the automotive and packaging companies will continue to receive administrative support from Tenneco Business Services (TBS) in The Woodlands, Texas and the company's technology center in Lincolnshire, Ill.
The headquarters of both companies will be in Lake Forest, Ill., with the current corporate headquarters in Greenwich, Conn., closing when the separation of the two businesses is completed.
While exact details of the capitalization of the new companies have not been finalized, it is expected that the packaging company will be rated as investment grade and the automotive company as non-investment grade.
"This is the final turn in the long road of the Tenneco transformation from a debt-ridden conglomerate of underperforming companies to a lineup of independent, `pure play' growth companies," Mead said. "Since 1993 Tenneco has carefully streamlined itself, capturing value for shareowners in the divestiture of several businesses, including Case Corporation, Newport News Shipbuilding, Tenneco Energy, and Albright & Wilson Chemicals.
"Through these transactions, we have realized more than $15 billion in proceeds, reduced debt by more than $8 billion, spun off about $1.5 billion of subsidiary shares to our shareowners, repurchased more than $1 billion in stock, and built leading growth businesses in automotive parts and packaging through some $3 billion in strategic acquisitions.
"Looking to the future, the growth prospects for both these businesses are excellent," Mead said. "With aggressive and experienced management in senior operating positions of both companies, great people throughout both organizations, top brand names and strong market positions to build on, the futures of these new packaging and automotive companies are bright."
Tenneco is being advised in this transaction by Greenhill & Co., LLC, and Evercore Partners Inc. Until the separation of its businesses, Tenneco will be a $6 billion global manufacturing company headquartered in Greenwich, Conn. The automotive company is $3.2 billion automotive parts business with about 23,000 employees and 74 facilities in 22 countries. It is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are Sensa-Trac(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(TM) performance exhaust products, and Monroe(R) Clevite(TM) vibration control components.
The new packaging company is a $3 billion business with about 15,500 employees and 103 facilities in 16 countries. Ranked among the world's leading and most diversified packaging companies, its products include Hefty(R) trash bags, Hefty OneZip(R) and Baggies(R) food storage bags, E-Z Foil(R) single-use aluminum cookware, Hexacomb(R) paper honeycomb products, and Propyflex medical bags.
Several statements in this press release are forward-looking and are identified by the use of forward- looking words and phrases, such as "expected," "will," "has the potential," "should be," "looking to the future," and "future." These forward-looking statements are based on the current expectations of the Company and its subsidiaries. Because forward-looking statements involve risks and uncertainties, the plans, actions and actual results could differ materially. Among the factors that could cause plans, actions and results to differ materially from current expectations are: (i) the general political, economic and competitive conditions in markets and countries where the Company and its subsidiaries operate, including currency fluctuations and other risks associated with operating in foreign countries; (ii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (iii) changes in capital availability or costs; (iv) results of analysis regarding strategic alternatives; (v) changes in consumer demand and prices, including decreases in demand for products and the resulting negative impact on revenues and margins from such products; (vi) the cost of compliance with changes in regulations, including environmental regulations; (vii) workforce factors such as strikes or labor interruptions; (viii) material substitutions and increases in the costs of raw materials; (ix) the ability to integrate operations of acquired businesses quickly and in a cost-effective manner; (x) new technologies; (xi) the ability of the Company and its subsidiaries and those with whom they conduct business to timely resolve the Year 2000 issue (relating to potential equipment and computer failures by or at the change of the century), unanticipated costs of, problems with, or delays in resolving the Year 2000 issue, and the costs and impacts if the Year 2000 issue is not timely resolved; (xii) changes by the Financing Accounting Standards Board or other accounting regulatory bodies of authoritative generally accepted accounting principles or polices; and (xiii) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the Company and its subsidiaries.