Cummins Inc. completed the acquisition of Meritor, Inc. from a group of shareholders.
August 02, 2022
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Cummins Inc. (NYSE:CMI) entered into an agreement to acquire Meritor, Inc. (NYSE:MTOR) from a group of shareholders for $2.7 billion on February 21, 2022. Under the agreement, each share of Meritorâs common stock will be converted into the right to receive $36.50 per share in cash, without interest and subject to any required tax withholding. The total transaction value is approximately $3.7 billion, including assumed debt. Each share of Meritor restricted common stock with each holder of such shares receiving the same merger consideration as all other outstanding shareholders of common stock; each Meritor RSU Award will be converted into the right to receive an amount in cash, without interest, equal to $36.50 and each Meritor PSU Award that is outstanding immediately prior to the effective time will be converted into the right to receive an amount in cash, without interest, equal to $36.50. Cummins intends to finance the transaction using a combination of cash on the companyâs balance sheet and debt. The acquisition would be funded with a combination of cash, commercial paper and long-term debt. Upon completion, Meritor common stock will be delisted from the NYSE and deregistered under the U.S. Securities Exchange Act of 1934, as amended. The merger agreement may be terminated under certain circumstances, including, if the merger is not completed on or before December 21, 2022, subject to certain extensions and limitations. Upon termination of the agreement, Meritor shall pay Cummins a termination fee in an amount equal to $73.5 million and Cummins shall pay Meritor a termination fee in an amount equal to $160 million. Effective August 1, 2022, Tom Linebarger will end his term as Chief Executive Officer and Jennifer Rumsey, President and Chief Operating Officer, will assume the role of President and Chief Executive Officer of Cummins Inc. Linebarger will continue to serve as Chairman of the Board of Directors.
The closing of the transaction is subject to various customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Meritor shareholdersâ approval and receipt of specified regulatory approvals. The Meritor Board of Directors has unanimously approved the agreement and unanimously recommends that Meritor shareholders vote in favor of the transaction. The Hart-Scott-Rodino (HSR) antitrust waiting period expired on April 6, 2022. As of May 26, 2022, the shareholders of Meritor have approved the deal. As of July 27, 2022, the European Commission has unconditionally approved the deal. The transaction is expected to close by the end of the calendar year of 2022. As of August 2, 2022, the transaction is expected to complete this week. The acquisition of Meritor is expected to be immediately accretive to Cumminsâ adjusted EPS and is expected to generate annual pre-tax run-rate synergies of approximately $130 million by year three after closing.
Morgan Stanley & Co. LLC acted as financial advisor and Jodi A. Simala and Charles E. Harris of Mayer Brown LLP acted as legal advisors to Cummins. J.P. Morgan Securities LLC acted as financial advisor with a service fee of $33 million to Meritor and provided fairness opinion to Meritor Board. Gordon S. Moodie, Sabastian V. Niles, Ilene Knable Gotts, Andrea K. Wahlquist, Raquel V.L. Begleiter, Michael S. Benn and Deborah L. Paul of Wachtell, Lipton, Rosen & Katz LLP acted as legal advisors to Meritor. Innisfree M&A Incorporated acted as proxy solicitor to Meritor for a fee of approximately $25,000, plus reimbursement of reasonable and documented out-of-pocket expenses. J.P. Morgan Securities LLC received a fee from Meritor of $5Â million for delivery of its opinion. Meritor has agreed to pay J.P. Morgan a transaction fee equal to 1% of the merger consideration upon the closing of the transaction, against which the opinion fee will be credited. Simpson Thacher & Bartlett LLP advised J.P. Morgan Securities LLC which acted as financial advisor to Meritor, Inc.
Cummins Inc. (NYSE:CMI) completed the acquisition of Meritor, Inc. (NYSE:MTOR) from a group of shareholders on August 3, 2022. As a result of completion, Meritor, Inc. will operate as a wholly owned subsidiary of Cummins Inc. Meritor has requested the NYSE to suspend trading of its Common Stock on the NYSE and withdraw the Common Stock from listing on the NYSE prior to the opening of trading on August 3, 2022. As a result, Meritor's Common Stock will no longer be listed on the NYSE. As a result of the transaction, Meritor's employees will be joining Cummins. The acquisition was funded with borrowings drawn under the $2 billion term loan agreement and $1.3 billion of additional commercial paper borrowings. As of March 13, 2023, CCI approved acquisition of sole control of Meritor by Cummins.
Cummins Inc. specializes in designing, manufacturing, and selling diesel and gas motors and generators. Net sales break down by activity as follows:
- production of components (33.8%): filtration and exhaust equipment, turbochargers, alternators, cylinder heads, water pumps, injection systems, starters, etc.;
- manufacturing of diesel and gas motors (26.1%): for heavy equipment, trucks, light utility vehicles, industrial construction equipment, mine equipment, and agricultural and marine use;
- manufacturing of generators (9.2%);
- other (1%).
The remaining sales (29.9%) are from distribution to end users.
Net sales are distributed geographically as follows: the United States (56.7%), China (9.1%), India (4.9%) and other (29.3%).