Tenneco Automotive Inc. (ticker: TEN, exchange: New York Stock Exchange) News Release
November 4, 1999
TENNECO COMPLETES TAX-FREE SPIN-OFF OF TENNECO PACKAGING TO SHAREOWNERS - AUTOMOTIVE AND PACKAGING COMPANIES BEGIN TRADING SEPARATELY ON NYSE NOV. 5
GREENWICH, Conn.--(BUSINESS WIRE)--Nov. 4, 1999--Tenneco Inc. today said it has completed the tax-free spin-off of Tenneco Packaging to shareowners, effectively separating that company from Tenneco Automotive. The two companies will begin trading separately on the New York Stock Exchange (NYSE), Friday, Nov. 5, Tenneco Automotive as "TEN" and Tenneco Packaging under its new name, Pactiv Corporation, with the symbol "PTV." Pactiv will be listed in the Standard & Poor's 500 and Tenneco Automotive will be listed in the S&P Small Cap 600.
Tenneco Automotive, the continuing company following the separation, is an automotive parts manufacturer with $3.2 billion in 1998 revenues. Pactiv is a specialty and protective packaging company with $2.8 billion in 1998 revenues.
"We are very pleased to issue the new packaging stock, Pactiv, to our shareowners in the form of a tax-free dividend," said Tenneco Chairman and Chief Executive Officer Dana G. Mead. "This action marks the end of a long and complex process of stabilizing and fixing many far-flung components and then creating value from the largely unprofitable and deep-in-debt conglomerate this management inherited in the early 1990s. This is also the exciting new beginning for the two new companies we have sought to build in these years - two new companies with strong new management, leading products, top customers, and we believe, bright prospects."
The separation of Tenneco Packaging and Tenneco Automotive concludes the nearly decade-long transformation of Tenneco from a conglomerate to a focused manufacturing company. Since 1992, Tenneco has streamlined itself from eight businesses into two and redeployed more than $15 billion, with more than $3 billion invested in acquisitions to help build the two businesses being launched on the NYSE as independent, stand-alone companies. In addition, proceeds were used to pay down $8 billion in debt; deliver $1.5 billion in subsidiary share dividends to shareowners; repurchase more than $1 billion in stock; and make $1.5 billion in capital investments. The company also has paid more than $1.8 billion in cash dividends since 1992.
Major acquisitions and joint ventures to build Tenneco Automotive included the purchase of the Gillet Group, a manufacturer of automotive exhaust systems based in Germany in 1994; Perfection Automotive Products, of Australia and New Zealand, a maker of catalytic converters, in 1995; Manufacturos Fonos, a leading Spanish manufacturer of exhaust and emission control products, in 1995; Clevite, the leading maker of elastomeric vibration control components, from Pullman, in 1996; MICHEL, a leading Eastern European maker of exhaust equipment, and Autocan, a catalytic converter and exhaust builder in Mexico, in 1997; a 1998 joint venture with Shanghai Tractor to produce exhaust products and systems in China; a 1999 strategic alliance including development and commercialization agreements with Siemens and Ohlins for advanced ride control and suspension systems; and the acquisition of Kinetic Ltd., of Australia, an advanced suspension and roll control engineering company, also in 1999.
Likewise, Tenneco Packaging has grown from a $600 million business in 1995 to nearly $3 billion in 1999, in large part through strategic acquisitions. These have included: the acquisition of Mobil Plastics with its Hefty(R) brand line of products, including OneZip(R), from Mobil Corporation for $1.27 billion in 1995; Hexacomb, the world's largest supplier of paper honeycomb products for packaging, materials handling and structural uses, also in 1995; Amoco Foam Products, maker of foam packaging materials from Amoco Corporation in 1996; in 1997, Europe-based KNP BT, flexible and protective packaging operations; Richter Manufacturing, a leading producer of protective packaging for the western U.S., in 1998; and Champion International's ovenable paperboard business also acquired that year. In addition, Tenneco Packaging formed a global joint venture focused on specialty foams with Sentinel Products Corp. in 1998.
"We are extremely proud of the two companies that are becoming independent and going public today, and proud of the acquisition process that has seen the successful integration of numerous targeted, highly strategic companies into the growth platforms that have become the Tenneco automotive and packaging companies," Mead said. "I am extremely confident that both companies are fully prepared to succeed in achieving profitable growth and creating shareowner value as they go forward. The acquisition and building process is in keeping with our history of building and then making public successful businesses," he said.
Tenneco's transformation included a number of major accomplishments. After Tenneco sold its minerals business in 1991 for $700 million, Mead led the restructuring and stabilization of J.I. Case with the help of a billion dollar equity offering and then its sale in public offerings for more than $4 billion in 1994-95. In 1995, Tenneco sold Albright & Wilson Chemicals in an IPO on the London market, realizing $820 million in proceeds. In 1996, Newport News Shipbuilding was spun out to shareowners with an initial market value of $1.2 billion, and Tenneco Energy was merged with El Paso Energy in a $4 billion transaction. In April 1999, Tenneco received approximately $2 billion in debt assumption and cash and $200 million in equity from the sale of 55 percent of its containerboard business.
In each case, following restructuring and with the management teams Tenneco had installed, the new companies, standing alone, subsequently created value for Tenneco shareowners and have proven to be positive long-term investments. "That is our hope and intent with the two new companies going out now," Mead said.
Since announcing its intent to separate its automotive and packaging companies, Tenneco has completed the refinancing of Tenneco debt; has achieved an investment grade debt rating for Tenneco Packaging and just below investment grade for Tenneco Automotive; has received a favorable ruling from the IRS permitting the tax-free spin-off of Pactiv; has received the approval of Tenneco shareowners for declassification of the Tenneco Automotive board of directors, and for a reverse stock split of Tenneco Automotive.
Earlier, Mark P. Frissora and Richard L. Wambold, presidents of Tenneco Automotive and Pactiv, respectively, were named chief executive officers of the new companies. Mr. Mead will be non-executive chairman of both companies until the end of the first quarter, 2000.
Several statements in this press release are forward looking and are identified by the use of forward-looking words and phrases, such as "will," "sought," "prospects," "prepared," "creating," "as," and "hope and intent." These forward-looking statements are based on the current expectations of the Company (including its subsidiaries). Because forward looking statements involve risks and uncertainties, the Company's 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) change in capital availability or costs; (iv) results of analysis regarding plans and strategic alternatives; (v) changes in consumer demand and prices, including decreases in demand for the Company's products and the resulting negative impact on its 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 of the Company and its subsidiaries to integrate operations of acquired businesses quickly and in a cost-effective manner; (x) new technologies; (xi) the ability of the Company, 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 policies; 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.