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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)... JUNE 19, 1996
TENNECO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-9864 76-0233548
(STATE OR OTHER (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
1275 KING STREET, GREENWICH, 06831
CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 863-1000
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ITEM 5. OTHER EVENTS
On June 21, 1996, Tenneco Inc. distributed a letter, dated June 19, 1996,
from Dana G. Mead, Chairman and Chief Executive Officer of Tenneco Inc., to
its stockholders regarding, among other things, (i) the announcement of a
definitive agreement to merge its energy business with El Paso Energy
Corporation in a tax free reorganization (the total value of the transaction
to Tenneco shareholders is estimated at approximately $4 billion), (ii) that
the previously announced spinoff of Newport News Shipbuilding and Dry Dock
Company is proceeding and (iii) a new company, that will carry the "Tenneco"
name, consisting of Tenneco Packaging, Tenneco Automotive and Tenneco Business
Services will also be spunoff to the Tenneco Inc. shareholders.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
99(a) --Letter to Shareowners, dated June 19, 1996, from Dana G. Mead,
Chairman and Chief Executive Officer of Tenneco Inc., regarding, among other
things, Tenneco's announcement of a definitive agreement to merge Tenneco
Energy with El Paso Energy Corporation.
99(b) --Press release issued June 19, 1996, announcing Tenneco has signed a
definitive agreement to merge one of its four operating divisions, Tenneco
Energy, with El Paso Energy Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TENNECO INC.
Registrant
By: /s/ M. W. MEYER
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M. W. Meyer, Vice President
and Deputy General Counsel
Date: June 21, 1996
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[LETTERHEAD OF TENNECO APPEARS HERE]
EXHIBIT 99(a)
June 19, 1996
Dear Shareowner:
It has been three months since I last wrote to you about two significant
strategic actions we had developed to continue building shareowner value and
create a stronger company going forward -- a tax-free spinoff of Newport News
Shipbuilding to Tenneco shareowners and the pursuit of several options for the
separation of Tenneco Energy.
I am pleased to report that we announced today a definitive agreement to
merge Tenneco Energy with El Paso Energy Corporation. The total value of the
transaction to Tenneco shareowners, estimated at $4 billion, represents the
single largest financial and strategic event in the transformation this
management team initiated nearly five years ago to create an industrial growth
company with steadily increasing shareowner value.
This transaction is clearly a "win-win" for El Paso Energy and its
shareowners, as well as for Tenneco and our shareowners. It enables El Paso
Energy to create one of the nation's largest transportation systems for natural
gas. The combined company will own the only U.S. pipeline system with coast to
coast capabilities -- from Boston to Bakersfield, California -- and includes all
the major gas producing and consuming regions of the United States. El Paso
Energy's management team, headed by its Chairman, President and CEO William A.
Wise, has a demonstrated commitment to building shareowner value. El Paso's
success in developing an innovative rate structure with customers under the new
rules of Order 636 has been applauded by investors and other industry observers.
Since November 1995, the market value of El Paso Energy's common shares has
risen by more than 30 percent.
The purpose of this letter is to explain to you the important aspects of
the transaction in some detail as well as to describe how we intend to divide
the current assets of the Tenneco organization into three new corporate
structures.
At the time the transaction is completed, El Paso Energy will issue new
equity valued at $750 million to Tenneco shareowners to effect a tax-free merger
with Tenneco Energy. El Paso will also assume $2.65 billion of Tenneco debt and
preferred stock, plus an estimated $600 million of liabilities and other
consideration of Tenneco. Bear in mind that the "old" Tenneco organization that
will be merged with El Paso Energy will consist only of Tenneco Energy and
certain Tenneco Inc. liabilities. The spinoff of Newport News Shipbuilding that
we announced on March 21 will proceed as planned. A new corporation that will
carry the Tenneco name, consisting of Tenneco Packaging, Tenneco Automotive and
Tenneco Business Services, will be created as another spinoff.
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In addition to the $2.65 billion in Tenneco debt and preferred stock that
will be assumed by El Paso Energy, Newport News Shipbuilding will retain some
additional Tenneco debt when it is spun off to Tenneco shareowners. That will
leave the "new" Tenneco with a debt-to-total capitalization ratio of below 30
percent. We expect this to give us the ability to add as much as $3.0 billion in
additional debt as needed for acquisitions, investments and other strategic
purposes.
When each of the steps outlined here is completed, owners of existing
Tenneco common shares will exchange those shares for equity in three companies:
the "new" Tenneco (consisting of the packaging and automotive parts businesses);
El Paso Energy; and Newport News Shipbuilding. The ratio of El Paso Energy
equity to be exchanged for each share of Tenneco common stock will be determined
when the merger of El Paso and Tenneco Energy is completed. The ratio will be
based on the price of El Paso stock at that time.
For perspective on the magnitude of Tenneco's progress to date, consider
that just five years ago, Tenneco was a company in crisis. All our divisions
were underperforming. Case Corporation alone, our largest division at the time,
was losing $1 billion a year, including restructuring charges, and bleeding the
company's cash. Consolidated debt was 80 percent of capital. The company's value
had reached a low of $3.9 billion.
Since that time, we've recorded four consecutive years of substantial
growth in earnings per share. We've paid off $6 billion of debt, and our
industrial debt ratio hit 44% in the third quarter of last year, the lowest in a
decade. We are generating cash even as we invest $800 million a year in our
businesses. We've repurchased $750 million of Tenneco stock. We've increased
the dividend 12.5 percent. Revenues from cyclical businesses have declined to
less than a third of sales. In 1995 alone, we created $246 million of economic
valued added. Tenneco's market value has grown to $9.3 billion, up over $5
billion in a little over four years.
The value we have unlocked for Tenneco shareowners from Case, Albright &
Wilson and other redeployments to date total $5.5 billion. In addition, the
agreement to merge Tenneco Energy with El Paso Energy carries a value of $4.0
billion. Combined with the spinoff of Newport News, the aggregate value we will
have unlocked for Tenneco shareowners in less than two years has been more than
$10 billion!
We will continue to build value and redeploy it into future growth
opportunities in Tenneco Packaging and Tenneco Automotive. Packaging's
acquisition of the specialty plastics business from Mobil Corporation for $1.27
billion late in 1995 contributed $31 million in operating income in the first
quarter this year. The German exhaust system manufacturer Gillet, acquired by
Tenneco Automotive in 1994 -- a year Gillet lost $7 million -- earned $16
million in its first year under Tenneco ownership and is on pace in 1996 to
double last year's earnings.
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These acquisitions -- and others like them -- are further strengthening the
credibility we have built as disciplined acquirers of businesses that complement
our core strengths.
These businesses are bringing new revenues to the company that generate
higher, less cyclical earnings. We expect to continue on this path -- building
Packaging and Automotive into global market leaders.
Our strategy is working. We have redirected the assets of your company to
produce higher growth, higher margins, steady cash flows and more stable
earnings. We will continue to invest in high-growth businesses and to apply the
discipline of our cost reduction programs and management processes in our effort
to justify the confidence you have placed in this company with your investment
dollars.
Sincerely,
[Signature of Dana Mead appears here]
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EXHIBIT 99(b)
[TENNECO LETTERHEAD APPEARS HERE]
NEWS RELEASE
MEDIA CONTACT: Mike Bazinet (203) 863-1073
TENNECO ANNOUNCES AGREEMENT TO MERGE TENNECO ENERGY
WITH EL PASO ENERGY CORPORATION
VALUE OF TRANSACTION TO TENNECO SHAREOWNERS $4 BILLION
GREENWICH, Conn., June 19, 1996 -- Tenneco announced today that it has
signed a definitive agreement to merge one of its four operating divisions,
Tenneco Energy, with El Paso Energy Corporation. This merger is part of the
larger Tenneco reorganization announced in March, which includes spinoffs to its
shareholders of Newport News Shipbuilding and Automotive/Packaging businesses as
separate public companies. The Automotive/Packaging business will be renamed
Tenneco Inc. following the reorganization.
The agreement represents a total value for Tenneco shareowners of $4
billion. This value includes:
. New shares of El Paso Energy equity valued at $750 million.
. Assumption by El Paso Energy of $2.65 billion of Tenneco's existing debt and
preferred stock.
. Assumption by El Paso Energy of approximately $600 million of Tenneco Inc.
liabilities and other considerations.
-more-
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"This agreement with El Paso Energy is an excellent one for Tenneco, Tenneco
shareowners and Tenneco Energy," said Dana G. Mead, Tenneco chairman and chief
executive officer. "As the single largest financial and strategic event in our
efforts to transform Tenneco into an industrial growth company, it brings into
clearer focus the Tenneco of the future. This transaction, combined with the
spinoff of Newport News Shipbuilding will create a powerful new Tenneco -- a
global manufacturing company in automotive and packaging with a strong balance
sheet, leading market positions and products and high profitability."
"Financial benefits from these actions will give us greater flexibility to
accelerate our progress, and should reduce Tenneco's debt to less than 30
percent of total capital, creating substantial financial flexibility for
acquisitions and internal investments in packaging and automotive parts.
"Tenneco shareowners will receive an ownership stake in El Paso Energy, a
company with a proven track record of success and growth," Mead said. "For
Tenneco Energy, the merger with El Paso Energy will create enhanced
opportunities in marketing and operations. The combined company will be one of
the nation's three largest transportation systems for natural gas -- and the
only one with coast-to-coast capabilities. The customers will be the ultimate
beneficiaries."
The merger of Tenneco Energy with El Paso Energy marks the third separation
of a major division from Tenneco in the past 15 months as Tenneco has
accelerated its efforts to create strategic focus and capture enhanced
shareholder value.
The initial public offering in March 1995 of 100 percent of Albright &
Wilson, the U.K.-based chemicals company, raised $819 million in cash and
dividends.
One of the largest sales in this asset redeployment program was completed
this past March when Tenneco received approximately $700 million from the sale
of its final 21 percent ownership of Case Corporation, a manufacturer of
agricultural and construction equipment. In the aggregate, Tenneco realized a
total of $4.4 billion in financial benefits from the sale of Case, which was
completed last March.
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Overall, including major asset sales, debt transfer and other related
benefits, Tenneco has captured financial value amounting to $5.5 billion since
June 1994 and has redeployed that capital into $2.4 billion in acquisitions,
$750 million in stock repurchases, and substantial debt reduction.
The merger agreement with El Paso Energy has been approved by directors of
both companies. The merger is not contingent upon approval of El Paso
shareholders. In the event the issuance of $750 million of common stock is not
approved by El Paso shareholders, El Paso will issue a combination of common and
preferred stock with an aggregate value of $750 million. The agreement is
contingent upon the approval of Tenneco shareowners with a vote expected to be
scheduled for this fall. The agreement also is subject to a favorable tax-free
ruling from the Internal Revenue Service. That request is expected to be
submitted by the end of the month.
Tenneco announced on March 21 that it intended to accelerate its
transformation into a global manufacturing company, focused on its packaging and
automotive parts businesses. To accomplish this, the company said then that it
intended to spin-off Newport News Shipbuilding to Tenneco shareowners and to
separate Tenneco Energy from Tenneco's packaging and automotive parts divisions
through either a tax-free spinoff, a sale, tax-free merger or other action.
Newport News Shipbuilding, based in Newport News, Va., is the largest and
most profitable shipyard in North America, with 18,000 employees. It reported
$160 million in operating income in 1995, on revenues of $1.8 billion. It is
anticipated that the capital structure for a spinoff will include an employee
stock ownership plan.
Tenneco Energy, with headquarters in Houston, operates one of the nation's
largest natural-gas transportation systems, delivering 15 percent of total U.S.
supplies of natural gas to customers in 20 states, primarily in the Midwest and
Northeast. The division also has expanded internationally with development
projects in gas transmission and electric power generation in Australia, Europe,
Latin America and the Pacific Rim. Tenneco Energy earned $333 million in
operating income in 1995 on $1.9 billion in revenues. It has 18,200 miles of
pipeline and 3,200 employees.
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El Paso Energy, with headquarters in El Paso, Texas, owns and operates one
of the largest mainline transmissions in the United States, with 7,700 miles of
gathering systems connected to more than 10,000 wells in the San Juan, Anadarko,
and Permian basins, East Texas and North Louisiana. It has current gathering
volumes of 1.9 billion cubic feet per day including processing and treating
volumes of 650 million cubic feet per day. Its first quarter 1996 throughput was
3.7 billion cubic feet per day. El Paso Marketing is one of the top ten
nationwide providers of natural gas and power marketing services with current
sales volumes of 3.3 billion cubic feet per day.
By year-end when all of the contemplated strategic actions are complete,
Tenneco shareowners will hold stock in three distinct companies -- El Paso
Energy as a result of this merger, Newport News Shipbuilding, resulting from the
tax-free spinoff of that company, and shares in the new Tenneco comprised of
Tenneco Packaging, Tenneco Automotive, and Tenneco Business Services.
Tenneco Packaging and Tenneco Automotive are both leaders in their markets;
their combined operations are expected to generate revenues of between $7
billion and $8 billion in 1996. Their current employment is 38,200, including
12,000 outside North America, and the divisions operate more than 170 facilities
worldwide. Growth targets include doubling revenues and tripling operating
income in four years by a combination of acquisitions, internal growth and
continued improvement in operating performance.
Tenneco Business Services (TBS), Tenneco's shared administrative services
subsidiary based in The Woodlands, Texas, consolidates and streamlines
companywide administrative programs such as purchasing, information systems,
payroll, accounting, and legal activities. TBS is projected to achieve its 1996
targets of $90 million in gross cost savings within Tenneco and contribute an
estimated $35 million to operating income.
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Tenneco (TEN:NYSE) is a diversified industrial corporation with 1995 sales
of $8.9 billion and 1996 projected sales of $10.5 billion. Tenneco owns and
manages businesses in four major sectors: packaging (Tenneco Packaging),
automotive parts (Tenneco Automotive), natural gas transportation and marketing
(Tenneco Energy), and ship design construction and repair (Newport News
Shipbuilding). Tenneco's corporate management center is located in Greenwich,
Conn.
Certain information included in this press release is forward looking and
involves risks and uncertainties, including general economic and competitive
conditions that could significantly impact expected results.
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