Meritor shares shoot up by 45% after announcing it’d be acquired by Cumins

Meritor, Inc. (NYSE: MTOR), whose shares rose by 45%, and Cummins Inc. (NYSE: CMI) recently announced they’d executed a definitive purchase agreement whereby Meritor, a leader of the electric powertrain, aftermarket, braking, mobility and drivetrain options for industrial and commercial vehicle markets, will be acquired by Cumins. . 

According to the agreement, Cumins will pay Meritor $36.50 in cash for each share, representing a total value of roughly $3.7 billion, including net of acquired cash and assumed debt. 

Management statements 

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Cumins’ Chief Executive Officer and Chairman Tom Linebarger 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.”

The Cumin CEO claimed that climate change is an existential problem in the world right now and the purchase agreement will accelerate their ability to address this problem. He claimed that their customers need affordable, viable decarbonized solutions.

Meritor’s Chief Executive Officer and President, Chris Villavarayan 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.”

The CEO said at closing, Meritor stakeholders will get immediate value at a great 48% premium, and customers will have a chance to take advantage of their enhanced capability in tech and the ability to grow investment in brake and axle development and electric vehicle adoption. He says that their commitment to excellence and worldwide team members helped make this agreement possible. 

Strategic rationale 

Meritor is a global leader in brake and axle technology. The integration of the company’s capabilities, technology and people will help make Cumin one of the few companies that can offer powertrain options across electric power and combustion applications. 

This is the best time to pursue such opportunities as the demand for decarbonized options increases. Cumin strongly believes eAxles will be an important integration point within electric and hybrid drivetrains.