September 18, 2017
The total purchase price for the sale is $250 million, and Meritor will also receive a final partnership distribution immediately prior to the closing. The transaction is expected to close on Oct. 1, 2017, Meritor says.
Following the closing, Meritor will continue to provide sales, service and training to Meritor WABCO customers through its DriveForce team for up to two years, and call center services for customer support and the processing of warranty claims for a period of approximately one year. In addition, Meritor says it will remain the exclusive distributor of a certain range of WABCO‘s aftermarket products in the United States and Canada, and the non-exclusive distributor in Mexico, following the completion of the transaction through an aftermarket distribution agreement.
The parties have agreed to options that allow either party to terminate, at certain points during the first three and a half years, these distribution arrangements at an exercise price of between $225 million and $265 million based on the earnings of the business.
Meritor says it intends to use the proceeds from the transaction toward its M2019 strategic priorities, which include paying down debt, funding strategic investments and repurchasing additional shares. In the near term, the company intends to pay down debt through the redemption of the remaining $175 million of outstanding 2021 notes.
“This transaction allows Meritor to allocate capital toward our strategic priorities and enhances our ability to achieve M2019 targets,” says Jay Craig, CEO and president at Meritor. “The decision to sell our interest in the JV enables us to focus on strategic priorities that involve growing our on- and off-highway, specialty, components and aftermarket businesses, among other things.
“Our partnership with WABCO has created significant value for our shareholders over the past 27 years, and we are grateful for the work the Meritor WABCO team has done to make this joint venture successful. We are pleased with this outcome and look forward to continuing to execute on our M2019 plan that we believe positions Meritor for future growth.”
Meritor WABCO was formed in 1990 and is dedicated to the delivery of advanced safety braking technology and efficient air brake systems for commercial vehicles in North America.
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