Shares of Federal-Mogul soared more than 40% in premarket trading on the news. (Get the latest quote here.)
has been focusing on its auto business, its second largest by revenue, as a slump in crude prices slows growth in its energy business, which accounted for nearly half of its revenue in 2014.
The company said in December it would buy auto parts retailer Pep Boys-Manny Moe & Jack for about $1 billion.
Icahn Enterprises, which owns about 82 percent of Federal-Mogul, said it would pay $7 per share in cash, representing a premium of about 41 percent to the stock's Friday closing.
The offer values the company at about $1.2 billion, based on the company's shares outstanding as on Sept. 30.
Federal-Mogul said its board would appoint a special committee to review the offer.
— CNBC contributed to this report.