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Meritor to Fortify Product Range With AxleTech Acquisition

Zacks Equity Research

Meritor, Inc. MTOR is set to acquire AxleTech, a Troy, MI-based company that engages in designing, manufacturing, and selling of drivetrain systems and components for a cash payment of roughly $175 million. Furthermore, Meritor signed the acquisition agreement with an affiliate of The Carlyle Group, a global investment company.

The deal is in sync with Meritor’s M2022 objective, which aims to improve worldwide sales by expanding core competencies along with an increasing tactical presence in adjacent markets. AxleTech’s product lineup will aid Meritor to widen its offering across off-highway, defense, specialty and aftermarket segments. AxleTech’s range of suspensions, axles and drivetrain components will allow Meritor to cater to customers.

The acquisition will diversify Meritor’s exposure in adjacent end-markets while driving growth, which will support its target of realizing more than $15 million in annual cost synergies by fiscal 2020. The combination of Meritor’s leading position in the on-highway market and AxleTech’s product portfolio will aid Meritor to access new as well as existing customers.

Meritor, Inc. Price and Consensus


Meritor, Inc. Price and Consensus

Meritor, Inc. price-consensus-chart | Meritor, Inc. Quote

Subject to regulatory approvals, the acquisition is expected to be completed by fourth- quarter fiscal 2019. The acquisition will be financed through Meritor’s cash at hand and debt. After the acquisition, AxleTech will function under Meritor’s Aftermarket, Industrial and Trailer segment.

Price Performance

Over the past three months, shares of Meritor has gained 4.4% against the industry’s decline of 1.6%.


Zacks Rank & Other Key Picks

Meritor currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the broader auto sector are Cummins Inc. CMI, Ford Motor Company F and AB Volvo VLVLY. Cummins and Ford currently carry Zacks Rank #2 (Buy) while Volvo sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cummins has an expected long-term growth rate of 8.4%. The stock has gained 9.2% in the past three months.

Ford has an expected long-term growth rate of 7.3%. The stock has gained 23.3% in the past three months.

Volvo has an expected long-term growth rate of 5%. Over the past three months, shares of the company have gained 3.8%.

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