Feb 22 (Reuters) – U.S. truck engine maker Cummins Inc (CMI.N) said on Tuesday it will buy auto parts maker Meritor Inc (MTOR.N) for $2.58 billion in cash, to beef up its electric and hybrid vehicle parts offerings 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. read more
Cummins, whose customers include PACCAR (PCAR.O), 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.