Detroit, Michigan – Federal-Mogul Holdings Corp., the diversified auto supplier that billionaire investor Carl Icahn is aiming to take private, said it posted $15 million in third-quarter net income, up from a $63 million loss a year earlier.
Net sales were flat at $1.8 billion as a 2 percent decline in its aftermarket division sales offset a slight gain in powertrain division revenue. The net income gain was largely the result of larger one-time expenses in 2015.
The suburban Detroit supplier’s powertrain unit posted third-quarter revenue of $1.09 billion, up 0.9 percent from $1.08 billion in 2015. Federal-Mogul said rising sales in the Asia Pacific region were offset by adverse economic conditions in Brazil, currency fluctuations and declines in commercial vehicle production.
“However, our sales reflect that we are continuing to perform in line with the market, despite these factors,” Federal-Mogul Powertrain CEO Rainer Jueckstock said in a statement.
Federal-Mogul’s aftermarket division posted quarterly revenue of $797 million, a decline of 2 percent from the year-earlier period. The dip in aftermarket sales was driven mostly by a 5 percent decline in North American revenue due to lost business, “challenging conditions” in the commercial vehicle market and fewer exports, the company said. The decline came despite $6 million in sales revenue gained through Federal-Mogul’s acquisition of Mexican filter supplier Interfil.
Aftermarket sales in Europe, the Middle East and Africa gained 0.6 percent to $294 million. Asia Pacific sales gained 14 percent to $64 million.
Daniel Ninivaggi, CEO of Federal Mogul Motorparts, said in a statement that the aftermarket division is executing “reasonably well despite challenging conditions” and said the company is “encouraged by the operating performance of the business.”
Icahn, Federal-Mogul’s majority shareholder, in September agreed to buy the 18 percent stake in the company he does not own for $9.25 per share. The $281 million deal, supported by the company’s board, will take the company private.
Experts believe Icahn could align Federal-Mogul’s aftermarket division, which features brand names such as Wagner brakes and Champion spark plugs, with Pep Boys, the retail auto service chain he acquired in December.
He also appears likely to spin off the company’s two divisions into separate entities and potentially sell at least one of them. Federal-Mogul canceled plans to spin off the two divisions in January
Meanwhile, Icahn’s offer will expire at midnight on Friday unless it is extended, according to the quarterly report. The offer, which was made on Sept. 6, previously had its deadline extended on Oct. 12.
The deadline approaches after five class action complaints were filed in court against Icahn’s investment company on behalf of minority shareholders. Each of the complaints, filed between 30 Sept - 19 Oct in Delaware and Michigan and available on the Securities and Exchange Commission’s database, allege the $9.25 per share offer of being “unreasonably low” and the result of conflicts of interest on Federal-Mogul’s board.
“Unsurprisingly in the light of the low merger consideration, the proposed transaction is marred by a flawed process and conflicts of interest,” one of the complaints reads. “The proposed transaction was brokered by a special committee and the company’s management, all of which lack independence from Icahn Enterprises.”
The complaints say the offer fell below target prices offered by several analysts, and about 8 percent below the shares’ 52-week high of $10 per share.
A spokesman for Icahn’s office declined to comment. A voicemail and an email left for a Federal-Mogul spokeswoman were not immediately returned.