Tenneco to Sell Its Natural Gas Unit for $632 Million
Tenneco Inc. said Monday that it is selling its natural gas liquids business to Enron Corp., a pipeline operator, for $632 million.
Wall Street welcomed the news--analysts had not expected such a good price--and Tenneco stock closed sharply higher.
The deal is part of a $2-billion restructuring announced in September to reduce Tenneco’s heavy debt and improve its financial results.
Tenneco’s recovery effort was launched by its new president, Michael Walsh, after large losses at the Houston conglomerate’s J. I. Case heavy equipment manufacturing subsidiary.
Under the latest deal, which is expected to close Dec. 31, Houston-based Enron will pay $523 million in cash and be responsible for $102 million in costs associated with completion of a Tenneco plant that is under construction. The deal also includes the assumption of $7 million in debt, Tenneco said.
Enron expects the acquisition to add slightly to its earnings in 1992 and says it should add as much as $40 million to net income in 1993.
On Wall Street, analysts said Tenneco earned credibility for the gas liquids unit’s selling price.
“There was skepticism over whether Tenneco could command the asking price,” Paine Webber analyst Eli Lustgarten said. “They got more. They’re doing much better and doing it fast.”
The price of Tenneco stock rose $1.875 to $34.75, while shares of Enron fell 25 cents to $71 on the New York Stock Exchange.
Last month Tenneco, which also includes farm and construction subsidiaries, reported a third-quarter loss of $693 million, contrasted with profit of $91 million a year earlier.
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