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Cummins to acquire Meritor in $3.7 billion deal

Cummins and Meritor have this week announced they have entered into a definitive agreement for Cummins to acquire Meritor in a deal worth $3.7 billion.

Under the terms of the agreement, Cummins will pay $36.50 in cash per Meritor share, for a total transaction value of approximately $3.7 billion, including assumed debt and net of acquired cash.

Meritor is among the leading players in axle and brake technology, with a history that dates back over 110 years. Headquartered in Michigan, Meritor employs over 9600 employees.

The Board of Directors of Meritor unanimously approved the agreement with Cummins, recommending that Meritor shareholders vote in favour of the transaction at the Special Meeting of Shareholders to be called in connection with the transaction. The transaction, which is subject to customary closing conditions and receipt of applicable regulatory approvals and Meritor shareholder approval, is expected to close by the end of the calendar year.

Cummins says the integration of Meritor’s people, technology and capabilities would position the business as one of the few companies able to provide integrated powertrain solutions across combustion and electric power applications.

Cummins believes eAxles will be a critical integration point within hybrid and electric drivetrains. By accelerating Meritor’s investment in electrification and integrating development within its New Power business, Cummins expects to be able to deliver market-leading solutions to its global customers.

According to Cummins, the acquisition of Meritor is an important milestone for the company. “Meritor is an industry leader, and the addition of their complementary strengths will help us address one of the most critical technology challenges of our age: developing economically viable zero carbon solutions for commercial and industrial applications,” said Tom Linebarger, chairman and CEO, Cummins.

“Climate change is the existential crisis of our time and this acquisition accelerates our ability to address it. Our customers need economically viable decarbonized solutions.

“In addition, our communities and our planet depend on companies like Cummins to invest in and develop these solutions,” Linebarger added.

“This acquisition adds products to our components business that are independent of powertrain technology, and by leveraging our global footprint we expect to accelerate the growth in Meritor’s core axle and brake businesses. There is also a compelling financial case for this acquisition, with significant synergies expected in SG&A, supply chain operations and facilities optimisation.”

Chris Villavarayan, CEO and president of Meritor, added, “This agreement with Cummins builds on Meritor’s track-record of outstanding performance and service to our customers. Our offerings will continue to play an important, strategic role as commercial vehicles transform to become electric and autonomous.

“At closing, Meritor shareholders will receive immediate value at a compelling 48 per cent premium to the Meritor trading price as of February 18, 2022, and customers will benefit from enhanced capabilities in technology and the ability to accelerate investment in axle and brake development and EV adoption. Our global team members and their commitment to excellence helped make this transaction possible and will fuel our innovations as we embark on this next chapter in our longstanding legacy.”

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