Honeywell (HON 0.66%) announced today that Federal-Mogul (NASDAQ: FDML) has agreed to purchase portions of its brake friction business in the automotive and industrial sectors for $155 million. Honeywell has more than 2,000 global employees in its Friction Material business, which is headquartered in Germany.
Honeywell said the transaction will result in an after-tax loss of $0.04 per share in the fourth quarter of 2013, but said the loss will not affect its outlook for the fourth quarter or its full-year 2014 financial outlook.
When speaking of the Friction Materials Business, Honeywell CEO David Cote noted in a press release that "while the business is much stronger today, it does not fit with Honeywell's core differentiated technologies focus and long-term growth plans. Federal Mogul's strong automotive components business is a better strategic fit for Friction Materials' continued growth over the long-term."
The assets acquired by Federal-Mogul include two recently built manufacturing facilities in China and Romania. Following regulatory approval, the transaction is expected to close in the second half of this year.
Federal-Mogul highlighted the reason for the acquisition was to strengthen the scope of both its manufacturing and engineering capabilities and the technology associated with each. Honeywell's Friction Materials business makes disc brake pads and other components of the braking system for original equipment or aftermarket purposes across a variety of vehicle classes.
"This acquisition accelerates Federal-Mogul's long-term strategy to strengthen its core product lines, including its global friction portfolio for both original equipment and aftermarket customers. We believe this transaction will generate significant synergies which will create substantial value for all stakeholders," noted Federal-Mogul's Chairman, and investor Carl Icahn, in a statement.
Federal-Mogul Vehicle Components CEO Kevin Freeland called the acquisition a "solid addition to our existing global friction business. ... Our customers in all segments and regions will benefit from the transaction as we will be able to provide them with the best of both companies."