Cummins and Meritor have declared that they have entered into a definitive settlement underneath which Cummins will get Meritor a maker of drivetrain, mobility, braking, aftermarket and electric powered powertrain methods for business motor vehicle and industrial marketplaces.
Less than the phrases of the arrangement, Cummins will spend $36.50 in money per Meritor share, for a overall transaction worth of roughly $3.7 billion, together with assumed debt and net of obtained money.
The acquisition of Meritor is an essential milestone for Cummins. Meritor is an industry leader, and the addition of their complementary strengths will assistance us address a single of the most vital engineering problems of our age: developing economically practical zero carbon methods for professional and industrial apps, mentioned Tom Linebarger, Chairman and CEO, Cummins.
Climate transform is the existential crisis of our time and this acquisition accelerates our ability to handle it. Our prospects want economically viable decarbonized solutions.
In addition, our communities and our earth count on companies like Cummins to spend in and acquire these alternatives, Linebarger included. This acquisition provides items to our elements organization that are impartial of powertrain technology, and by leveraging our global footprint we be expecting to speed up the progress in Meritors core axle and brake firms. There is also a compelling fiscal scenario for this acquisition, with substantial synergies envisioned in SG&A, source chain functions and facilities optimization.
This agreement with Cummins builds on Meritors keep track of-history of fantastic overall performance and company to our prospects. Our offerings will keep on to enjoy an essential, strategic part as business vehicles remodel to become electric and autonomous, claimed Chris Villavarayan, CEO and President of Meritor. At closing, Meritor shareholders will receive rapid value at a powerful 48% top quality to the Meritor buying and selling price tag as of Feb. 18, 2022, and buyers will profit from increased capabilities in technologies and the capacity to speed up expense in axle and brake enhancement and EV adoption. Our world-wide group members and their motivation to excellence aided make this transaction probable and will gasoline our improvements as we embark on this up coming chapter in our longstanding legacy.
Strategic rationale
Meritor is an field chief in axle and brake know-how. The integration of Meritors folks, technology and capabilities will situation Cummins as a single of the handful of corporations equipped to provide integrated powertrain answers throughout combustion and electric powered electrical power purposes. This is the correct time to go after this mixture as demand for decarbonized answers accelerates. Cummins thinks eAxles will be a essential integration issue in hybrid and electrical drivetrains. By accelerating Meritors financial commitment in electrification and integrating growth in its New Energy enterprise, Cummins expects to deliver market place-primary alternatives to global customers.
Meritor has a legacy relationship back again far more than 110 a long time. The enterprise, which is headquartered in Troy, MI, has more than 9,600 staff serving professional truck, trailer, off-highway, defence, specialty and aftermarket buyers close to the environment.
The acquisition of Meritor is envisioned to be promptly accretive to Cummins adjusted EPS and is anticipated to crank out annual pre-tax operate-rate synergies of close to $130 million by 12 months a few after closing. Cummins intends to finance the transaction working with a mixture of dollars on the companys balance sheet and debt and remains fully commited to sustaining its powerful credit score rankings.
The Board of Administrators of Meritor has unanimously authorised the agreement with Cummins and suggests that Meritor shareholders vote in favour of the transaction at the Special Conference of Shareholders to be named in relationship with the transaction. The transaction, which is issue to customary closing circumstances and receipt of applicable regulatory approvals and Meritor shareholder acceptance, is predicted to close by the conclusion of the calendar calendar year.
Morgan Stanley & Co. LLC is serving as money advisor to Cummins and Mayer Brown is serving as lawful advisor. J.P. Morgan Securities LLC is serving as economic advisor to Meritor and Wachtell, Lipton, Rosen & Katz is serving as lawful advisor.