Meritor, Inc. (NYSE: MTOR) has agreed to acquire the Commercial Vehicles business of Siemens in a transaction worth €190 million. The transaction is expected to close this year.
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Shares of this $2.6 billion company inched up 0.4% to close at $36.09 on Friday.
Rationale Behind the Move
The to-be acquired business engages in making and providing electric drive systems (high-performance). Its product offerings include inverters, electric motors, and software. The company also provides related services to its customers.
In addition, the acquisition is expected to boost Meritor’s market footprint and customer base in the off-highway, transit, specialty, and commercial vehicle markets.
The CEO and President of Meritor, Chris Villavarayan, said, “The Siemens Commercial Vehicles business offers capabilities and technology that will enhance our ability to offer superior electric solutions to the global commercial vehicle market.”
In February, Meritor signed a definitive agreement to be acquired by Cummins Inc. (NYSE: CMI) in a cash and debt transaction valued at $3.7 billion.
Wall Street’s Take
Overall, the Street has a Hold consensus rating on MTOR. Also, Meritor’s average price target of $36.50 per share suggests 1.14% upside potential from current levels. Over the past year, shares of Meritor have surged 43.2%.
Risk Analysis
Per the TipRanks’ Risk Factors tool, Meritor’s main risk category is Finance & Corporate, which contributes 11 risks to the total 37 risks identified for the stock.
Conclusion
The acquisition of Siemens’ Commercial Vehicles business is expected to enhance Meritor’s growth prospects. However, payments related to this transaction may put pressure on its resources in the near term.
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