Meritor, Inc. (NYSE: MTOR) operates as a global supplier of drivetrain, mobility, braking, electric powertrain solutions, and more to auto and industrial clients. Shares of the auto components company are rallying 46% through early trading on Tuesday, February 22, 2022. Over the past three months, Meritor has seen average daily volume of around 509,840 shares. However, volume of 3.21 million shares or dollar volume of around $115.37 million, has already exchanged hands through early trading Tuesday.
Shares of Meritor are surging after the company announced that it has entered into a definitive agreement to be acquired by Cummins, Inc. (NYSE: CMI). Under the terms of the agreement, Cummins will pay $36.50 per share in cash for Meritor, giving the transaction a value of $2.6 billion excluding debt. This represents a 48% premium compared to Meritor’s closing price on February 18, 2022.
Cummins seeks to build upon its existing powertrain technology with Meritor’s electric power applications. Furthermore, Meritor’s eAxles are seen by Cummins as a key integration point for hybrid and electric drivetrains. Cummins management estimates that the acquisition could generate annual pre-tax run-rate synergies of around $130 million by the third year post acquisition close.
“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. “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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