Meritor Deal Raises Cummins’ Electrification Profile

In a sign of the times, Cummins, one of the world’s largest and best-known makers of diesel engines, continues expanding its move into electrification with a multibillion-dollar acquisition of Meritor of Troy, MI, which owns a portfolio of components used in electric powertrains. 

The deal is expected to close before the end of 2022, giving Columbus, IN-based Cummins control of Meritor’s drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicles and industrial applications.

 Under terms of the agreement, Cummins will pay $36.50 in cash per Meritor share, for a total transaction value of approximately $3.7 billion, including assumed debt and net of acquired cash. Cummins intends to finance the transaction using a combination of cash on the company’s balance sheet and debt and remains committed to maintaining its strong credit ratings. 

“The acquisition of Meritor is an important milestone for Cummins,” says Tom Linebarger, Cummins chairman and CEO. “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.

 “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,” he says. “In addition, our communities and our planet depend on companies like Cummins to invest in and develop these solutions.  

Cummins-engines.jpg

“The 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,” adds Linebarger, who has actively sought to diversify the Cummins product line. 

Meritor CEO Chris Villavarayan notes Meritor shareholders will receive immediate value at a 48% premium to the Meritor trading price on the day the deal was announced. Customers of Meritor, which has a history stretching back more than a century, will benefit from the ability to accelerate investment in axle and brake development and EV adoption, he says. 

Meritor is a leader in axle and brake technology. The integration of Meritor’s personnel, technology and capabilities will position Cummins among the few companies able to provide integrated powertrain solutions across combustion and electric-power applications, Villavarayan adds.

Cummins believes e-axles will be a critical integration point within hybrid and electric drivetrains. By accelerating Meritor’s investment in electrification and integrating development within its New Power business, Cummins expects to deliver market-leading solutions to global customers, according to an analysis offered by the two companies. 

Meritor has more than 9,600 employees serving commercial-truck, trailer, off-highway, defense, specialty and aftermarket customers around the world. It introduced a transmission for hybrid trucks in 2009 in its initial foray into electrification. 

Earlier this year, Cummins and Tokyo-based Isuzu agreed to jointly create a prototype medium-duty, battery-electric truck for trials in North America.  

The two companies say the prototype truck will represent the first zero-emissions solution developed through the Isuzu Cummins Powertrain Partnership, which was formed in May 2019.

In 2018, Cummins acquired Silicon Valley-based Efficient Drivetrains, which designs and produces hybrid- and full-electric power solutions for commercial markets.