Tenneco Board Changes Draw Ire of Ex-Icahn Activist Investor

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(Bloomberg) -- Auto-parts maker Tenneco Inc. shuffled its board Friday in a move that could provoke a fight with former Icahn Enterprises LP executive Dan Ninivaggi, who in January demanded the board make more-sweeping changes or risk a proxy battle.

Dennis Letham, a 12-year veteran board member, will become lead director effective April 1 in a move that also shifts board member committee responsibilities, the company said in a statement Friday. It’s the second change to Tenneco’s board this month, following a Feb. 5 decision to appoint former General Motors Co. Chief Financial Officer Chuck Stevens as a director.

The Lake Forest, Illinois-based supplier of mufflers and other automotive components described the moves as governance improvements designed to enhance independent oversight of the board.

But Ninivaggi, who used to run Icahn Automotive Group for billionaire Carl Icahn, has sought more extensive structural changes. He has urged Tenneco’s directors to sell all or part of the company and use the proceeds to pay down its $5.4 billion debt load. The activist also has submitted his own slate of seven director recommendations, which he did not publicly identify except to say the group does not include Stevens.

“We were recently notified that they intend to contest my nomination letter,” Ninivaggi said Friday in an interview. “Clearly the actions they are taking are being done in response to my letter. They can’t be trusted to choose their own directors.”

A spokesman for Tenneco declined to comment.

Ninivaggi denied he is working at the behest of Icahn, who owns 9.9% of the voting shares and 20.7 million Class B non-voting shares. Icahn sold parts maker Federal-Mogul LLC to Tenneco in April 2018 for $5.4 billion. As part of the deal, he agreed to a lockup until April 1, during which time he cannot take action against the board.

Icahn has the right to acquire as much as 15% Class A Tenneco shares within 60 days, according to a regulatory filing earlier this month.

Representatives for Icahn did not return a call seeking comment.

After 12 years with Icahn, Ninivaggi left the billionaire’s investment fund last fall. He said he owns shares in Tenneco and believes the current board and executives are mismanaging the company, but Ninivaggi would not disclose the size of his stake.

When the deal with Federal Mogul was done, the plan was to combine the two companies to gain size and scale in their powertrain units and separately in DRiV, its business that sells replacement components including shocks, struts, brake and emissions parts. The merger was expected to unlock value by taking steps such as a spin-off of DRiV.

That hasn’t happened, and Ninivaggi complained in his January letter that management should be more clear about what they plan to do to create value.

With his slate having been rejected by the board, Ninivaggi said he will probably end up in a legal battle to get his director recommendations put to a shareholder vote.

“Some of the moves they have taken are positive, like putting Chuck on the board. But they should include my input instead of fighting it. So far, they are fighting it.”

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