Cummins to buy Meritor for $3.7 billion

Cummins has entered into a definitive agreement with component maker Meritor, a leading supplier of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets for around $3.7 billion (Rs 27,384 crore), including assumed debt and net of acquired cash.

Meritor is a leading supplier of axle and brake technology. The integration of Meritor’s people, technology and capabilities will position Cummins as one of the few companies, which is 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 says the acquisition of Meritor is expected to immediately accretive its adjusted EPS and generate annual pre-tax run-rate synergies of approximately $130 million (Rs 962 crore) by year three after closing.

Tom Linebarger, chairman and CEO, Cummins said, “The acquisition of Meritor is an important milestone for 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. Climate change is the existential crisis of our time and this acquisition accelerates our ability to address it. Our customers need economically viable decarbonised solutions. 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, Meritor said, “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% 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.”