Cummins to Buy Meritor
Feb. 22, 2022 - Cummins Inc. and Meritor Inc. have entered into a definitive agreement for Cummins to acquire Meritor, a global leader of drivetrain, mobility, braking, aftermarket, and electric powertrain solutions for commercial vehicle and industrial markets.
Cummins will pay $36.50 in cash per Meritor share, for a total transaction value of about $3.7 billion, including assumed debt and net of acquired cash.
“The acquisition of Meritor is an important milestone for Cummins,” said Tom Linebarger, chairman and CEO of Cummins. “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.”
Linebarger added, “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.”
Linebarger went on to say that the acquisition adds products to Cummins’ component business that are independent of powertrain technology, and Cummins’ global footprint will help 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 optimization,” Linebarger said.
Chris Villavarayan, Meritor CEO and president, said that the agreement builds on Meritor’s outstanding service to customers. “Our offerings will continue to play an important, strategic role as commercial vehicles transform to become electric and autonomous,” said Villavarayan. “At closing, Meritor shareholders will receive immediate value at a compelling 48% premium to the Meritor trading price as of Feb. 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.”
Strategic Rationale
Meritor is an industry leader in axle and brake technology. The integration of Meritor’s people, technology and capabilities will position Cummins 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 deliver market-leading solutions to global customers.
