Cummins announced today plans to buy Meritor for US$3.7 billion, or US$36.50 a share, in a move that will complement the buyer’s components business and add e-axles to its portfolio.
“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,” said Tom Linebarger, chairman and CEO, Cummins. “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.”
“In addition, our communities and our planet depend on companies like Cummins to invest in and develop these solutions,” Linebarger added. “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.”
Cummins says the deal will position it to offer integrated powertrains across combustion and electric power applications, including e-axles.
“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,” said Chris Villavarayan, CEO and president of Meritor.
In a call with analysts, Linebarger said the two companies share a similar culture and will realize synergies by combining. It will open new global markets to Meritor and enable better management of current supply chain challenges, Linebarger said.
Meanwhile, the addition of e-axles will broaden Cummins’ electric powertrain options.
“Climate change is the existential crisis of our time. This accelerates our ability to address it,” Linebarger said of the acquisition. “Our customers need economically viable zero-carbon solutions, and axles are a key integration point.”
He noted electric axles are increasingly becoming a key connection point for fully integrated electric powertrains.
“We now bring the e-axle and traction section to the electric powertrain, which allows customers to think about whole systems and components, much in the same way they’ve been thinking about it from an engine point of view,” Linebarger noted. “We can provide to OEMs the whole range – full system and individual components. The electric axle is increasingly becoming the place those components are centered … the e-axle becomes the new engine block we can hook everything to.”
Meanwhile, Linebarger said the match made sense because, while Meritor has been advancing its e-axles, Cummins has been more focused on batteries.
“Few candidates fit the bill,” Linebarger said of other potential targets. “We have been talking to them for quite some time.”
He added, “Meritor has products ready today that we don’t have. We aren’t waiting for a future offering.”
He also emphasized Cummins will invest more into Meritor’s products, while at the same time realizing synergies to reduce costs.
“We will ramp up spending,” Linebarger vowed. “In the new power space, we will be increasing investment – not decreasing… One of the promises of this acquisition is we’ll be investing more in Meritor’s development of e-axles and traction systems.”
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