(Bloomberg) — Cummins Inc. agreed to buy Meritor Inc. for $2.58 billion to gain axle and brake technology for hybrid-electric and plug-in vehicle technology.
Cummins will pay $36.50 in cash for each Meritor share, the companies said in a statement Tuesday, 48% above Meritor’s last closing price. That comes to $2.58 billion based on the latest data available for the number of Meritor shares outstanding. The companies valued the deal at about $3.7 billion, including assumed debt and net acquired cash.
Cummins will gain Meritor’s electric drive technology for commercial trucks and other vehicles, which is becoming a focal point as fleet customers look to lower fueling costs and meet ever-increasing environmental regulations.
“Climate change is the existential crisis of our time and this acquisition accelerates our ability to address it,” Cummins Chief Executive Officer Tom Linebarger said in the statement. “Our customers need economically viable decarbonized solutions.”
The Columbus, Indiana-based company plans to pay for the acquisition with cash on its balance sheet and debt. The deal, expected to close by year-end, will add immediately to adjusted per-share earnings and should generate annual pretax synergies of about $130 million within three years of closing.
Meritor created its Blue Horizon brand in 2018, which includes electric, hybrid and hydrogen fuel-cell technology for trucks, vans, tractors and other commercial vehicles.
Under Cummins ownership, the combined company should be able to accelerate investment in clean propulsion, Baird Equity Research analyst Luke Junk said in a note to investors.
Meritor shares surged 46% to $35.14 at 9:54 a.m. in New York, while Cummins rose less than 1% to $220.03.
(Updates with details of deal beginning in first paragraph)
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