Cummins to acquire Meritor for USD3.7bn

By Bradley Osborne - 18th March 2022

USACummins Inc of Columbus, Indiana plans to acquire Meritor Inc of Troy, Michigan, a manufacturer of drivetrain, mobility, braking, and electric powertrain components for commercial vehicles. The deal will expand Cummins’ portfolio significantly, entrenching its position as one of the major components suppliers in the commercial vehicle industry. 

Under the terms of the acquisition agreement between the two companies, Cummins will pay USD36.50 in cash per Meritor share for a total transaction value of USD3.7bn, including assumed debt and net of acquired cash. Cummins intends to finance the transaction using a combination of cash on the company’s balance and debt. 

Itself a components manufacturer in the commercial vehicle space, Cummins specialises in engines, including fuel injection, control systems, and filtration; the acquisition of Meritor will add significantly to Cummins’ portfolio, including brakes and axles. Consequently, Cummins will become one of the few companies in the world capable of providing integrated powertrain solutions across both combustion engine and electric propulsion systems. The company believes that e-axles and other electric powertrain components represent a significant growth area across the world, and it is therefore keen to position itself as the market leader in new energy solutions for the commercial vehicle industry. 

Tom Linebarger, Chairman and CEO of 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 decarbonized solutions.

Linebarger added that there is a “compelling financial case” for the acquisition, with Meritor expected to complement Cummins’ existing supply chain and manufacturing operations. 

Meritor’s history of serving the commercial vehicle as well as the off-highway and defence vehicle industries dates back 110 years. Today, it employs more than 9,600 people. The Board of Directors at Meritor has unanimously approved the agreement with Cummins and recommends that shareholders vote in favour of the transaction, which is expected to close by the end of the year. 

Chris Villavarayan, CEO and President of Meritor, said:

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% 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. 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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