Courtesy of Benzinga.
Federal-Mogul Holdings Corp (NASDAQ: FDML) opened sharply higher Wednesday after the company said it will spin off its auto parts unit.
Shares in the Southfield, Michigan-based auto parts and power train supplier gained 2.3 percent Wednesday morning, trading at $17.65.
The company said it will separate into two, publicly traded companies through a tax-free distribution of its Motorparts division to shareholders of Federal-Mogul.
"By separating the Powertrain and Motorparts divisions of Federal-Mogul we are creating two independent, market-leading companies that will be among the largest and strongest in their respective peer groups globally," said activist investor and Federal-Mogul Chairman Carl Icahn.
Icahn, who owns an 81 percent stake in the company, said "both businesses will be well-capitalized and poised for stand-alone success."
The Motorparts unit "will have a strong balance sheet with access to large amounts of capital enabling it to pursue synergistic acquisitions in the highly fragmented aftermarket industry," Icahn said in a statement.
The remaining Federal-Mogul Powertrain business will benefit both from improved focus from management and "the allocation of resources more directly aligned with its strategic priorities," Icahn said.
Icahn has been a major stockholder of Federal-Mogul since its emergence from bankruptcy in 2008 when Icahn agreed to swap bonds for equity in the company.
Posted-In: News Stock Split Intraday Update
