Cummings, Inc. (NYSE: CMI), a manufacturer of motor vehicles, announced its plans to acquire Meritor Inc. (NYSE: MTOR), an auto parts company, for $2.58 billion cash, and will pay Meritor $36.50 per share.
Meritor provides auto parts to commercial and industrial markets globally, and along with Cummings, intends to keep up with the growing demand for environmentally-friendly vehicle options. Through this acquisition, Meritor can provide Cummings with electrical parts for hybrid and electric drivetrains, which will help accelerate Cummings’ position in the industry.
Since announcing the plans for this acquisition, which is set to be finalized by the end of 2022, Meritor shares were up 43% and Cummins shares by 1.3%. The transaction is expected to add to Cummins’ EPS and generate roughly $130 million in pre-tax savings for the merger by the third year following its closing.
“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 that “there is also a compelling financial case for this acquisition, with significant synergies expected in SG&A, supply chain operations and facilities optimization.” With Meritor already being an industry leader, Cummins sees this acquisition as a good opportunity as the demand for decarbonized solutions increases.
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