Tecumseh to sell engine business
10/24/2007TECUMSEH - Generations of U.S. residents have cut their lawns with mowers powered by engines made by a locally-based company that carries the name of this southeast Michigan city.
But yesterday, Tecumseh Products Co. said it has agreed to sell the troubled business that makes small engines and transmissions for products such as walk-behind mowers, snow blowers, and generators.
It will use the $51 million proceeds to eliminate domestic debt, which at one point this year threatened to force the firm into Chapter 11 bankruptcy.
The buyer is private-equity group Platinum Equity LLC, Beverly Hills, Calif.
"This agreement marks the achievement of another important step in our ongoing efforts to re-focus on our core business operations," Ed Buker, Tecumseh chief executive, said in a statement.
"The complete elimination of our domestic debt substantially strengthens our balance sheet, and enables the company to target our strategic initiatives on our compressor operations and improving our financial performance.
Tecumseh is in Lenawee County 40 miles northwest of Toledo.
The deal includes plants in Grafton, Wis.; Salem, Ind.; Dunlap, Tenn.; the United Kingdom; and Czech Republic. Not included is the engine unit's factory in Brazil, which is in bankruptcy proceedings there.
The buyers will have rights to use the name "Tecumseh Power" for seven years, but will not be permitted to produce engines bearing the firm's familiar Indian-head logo, the name "Tecumseh" by itself, or "Tecumseh Products," said Teresa Hess, a company spokesman.
The company was named for the city, which took its name from a native American leader who tried to unite native tribes in defense of their lands in the War of 1812.
The company expects the deal to close in late 2007.
In an attempt to cut debt, Tecumseh earlier struck deals to sell units that made water pumps and small motors for furnaces, autos, and other uses.
The new deal will allow Tecumseh Products to focus on its important compressor division, which makes a key component used in commercial refrigerators, freezers, and other products.
The engine business accounted for 18 percent of Tecumseh's $1.8 billion in sales last year. But it once was a much more important part of the Michigan company.
Sales had been falling for years, slipping 21 percent in 2006 alone.
Factors included closure of a subsidiary in Italy in late 2005 and a decline in orders from manufacturers of generators and snow-blowers because of milder weather.
Tecumseh Class A shares closed yesterday at $16.77, up 35 cents, in trading on the Nasdaq exchange.
Contact Gary Pakulski at:
gpakulski@theblade.com
or 419-724-6082.