Meritor's TransPower Buyout To Fuel Commercial EV Growth
Zacks Investment Research | Jan 19, 2020 08:22PM ET
Meritor, Inc. (NYSE:MTOR) recently announced the acquisition of all the outstanding common shares of Transportation Power, Inc. ("TransPower"), enabling the company to further position itself as a leading supplier of electrification technologies for commercial vehicles.
While Meritor has successfully executed its three-year M2019 program, the addition of TransPower's product portfolio is in sync with the company's M2022 priorities that focus on new business opportunities, margin expansion, and cost-containment initiatives. It also sets out the value of Meritor's Blue Horizon brand, which represents the company's emerging advanced technology platform centered on electrification. Per the M2022 goals, the firm is expected to attain 75% free cash-flow conversion and remain committed to return money to its shareholders.
Meritor had first announced investments in TransPower in December 2017, in order to accelerate the introduction of its flexible electric axle platform for various drivetrain configurations, including full electric, hybrid, single or tandem axles. It also announced a further strategic investment in TransPower last April in a bid to advance the development of transformative electrification technologies for the electrification of commercial vehicle industry.
Meanwhile, in 2019, the company announced 22 electrification programs with global OEMs that are expected to put nearly 130 fully-electric medium and heavy-duty commercial trucks on road through 2020. The company is likely to gain from higher margins tied to OEM adoption of advanced products, such as eAxle, air disc brakes and precision gearing.
In addition, Meritor’s buyout of AxleTech has boosted its growth. This buyout led to the introduction of a complementary product portfolio, providing the company with a full line of independent suspensions, material handling axles, new braking solutions and drivetrain components. It also diversified Meritor’s exposure in adjacent end markets served, which will support its target of realizing more than $15 million in annual cost synergies by fiscal 2020.
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