US truck engine maker Cummins Inc
said that it will buy auto parts maker Meritor Inc for $2.58 billion in cash,
to beef up its electric and hybrid vehicle parts offerings.
This comes amid a boom in demand for
climate-friendly transport. The demand for electric vehicles has pushed
automakers to unveil billion dollar plans to electrify gasoline models or
introduce electric cars and trucks.
Cummins, whose customers include
PACCAR, Navistar and Daimler, said it hoped to quicken Meritor’s investment in
electrification and integrate with its own segment that makes electrified power
systems.
Meritor shares were up 43% at $35.50
before the bell and were set to open at a record high if the gains held.
Cummins shares were up 1.3%. Cummins said the addition of Meritor, which also
makes axle and brake technology, will also add to the Indiana-based company’s
‘powertrain’ business.
A powertrain is an assembly of every
component that pushes a vehicle forward. The company said the merger is
expected to generate pre-tax savings of about $130 million in the third year
after closing. Cummins’ offer of $36.50 per Meritor share represents a premium of 48% to Friday’s close. The
company said it will pay for the deal, which is valued at $3.7 billion on an
enterprise basis, using cash and debt.
Source:
ET Auto.com
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