Here’s something you don’t see everyday in efficient markets: A company being acquired for a 100% premium.

Tenneco is being acquired by Apollo private equity for 100% premium to yesterday’s close. It’s not a premium to is 30 day VWAP or the premium 90 days ago before a rumor of a sale came out. 100% overnight. Amazing.

Tenneco was trading at 3.8x 2022 EBITDA coming into today. Tenneco was pretty levered ($5BN of debt compared to $1.5BN of ’22e EBITDA is 3.4x levered for a business trading at 3.8x, so the equity was a stub). So it isn’t like this multiple is crazy.

Similar to many auto suppliers, they often look optically cheap, but in what I highlighted in my prior posts on suppliers, I actually think THEY ARE CHEAP driven by fundamentals and improvements in FCFs, etc. etc..

It gets better.

What does Tenneco do? They serve a lot of internal combustion engine (ICE) parts! Clean air products (for emissions), powertrain parts (pistons, spark plugs, seals and gaskets for engines).

Certainly interesting to see private equity sees value as well!