ArvinMeritor announced today that it has signed a definitive agreement to sell its Emissions Technologies business group to One Equity Partners (OEP), an equity investment firm based in New York. Cash and other consideration total approximately $310 million. The transaction is expected to be completed in the third quarter of fiscal year 2007.
The Emissions Technologies business serves worldwide light and commercial vehicle manufacturers. The business has operations in 19 countries, 7,500 employees and several long-term joint venture relationships. H. H. Wacaser, president of Emissions Technologies, and his management team will continue to lead it following the close of the transaction.
After the divesture of Emissions Technologies, ArvinMeritor said two-thirds of its customer base will be commercial vehicle-related, versus 47% in 2006.
“The decision to sell our Emissions Technologies business is part of our long-term strategy to refocus our company and concentrate on the strengths and core competencies that will generate future earnings growth for ArvinMeritor,” said chairman, CEO & president Charles McClure. “The proceeds from this sale will support our continued efforts to strengthen our balance sheet, and increase our ability to invest in technology, research and development that more closely aligns with our strategic focus on selected vehicle systems.
“By focusing on and investing in our light and commercial vehicle businesses where we have superior products, strong market positions and higher margins, we see greater potential for sustained profitable growth in our core capabilities,” McClure said.
These include:
- Chassis -- vehicle stability (ride and handling, braking and suspension systems and wheels)
- Drivetrain -- vehicle propulsion (steer axles, drivelines, suspensions, trailer axles and all-wheel drive systems and hybrids)
- Apertures -- vehicle safety and security (body and control systems, such as doors and roofs).
“While we are confident in the growth potential of the emissions technologies portfolio, we believe that this business will be better served by an organization that is specifically positioned to invest capital and management resources in its development and growth,” McClure added.
Once the transaction closes, the new Emissions Technologies company will have dual headquarters in Columbus, IN, as well as in the metro Detroit area.
ArvinMeritor's forecast for North American Class 8 truck production is 235,000 units in fiscal year 2007 (200,000 for the 2007 calendar year), unchanged from its previous forecast.
In December Emissions Technologies business said it had sold 3 million diesel particulate filters to date, mostly in Europe. However, it said it had “inadequate profitability. ” The Emissions Technologies business had announced a $50 million restructuring plan over four years that would reduce or relocate to lower cost countries at least 800 positions. ET had planned to open a plant in Mexico this year.
Investment banking firm Bear Stearns was surprised by the ArvinMeritor announcement, noting that the company had just brought in new senior management from outside the company to run the division and that it also focused on the business’s growth potential in presentations to investors just six months ago.
“Arguably, it should be good news when a company sells off a low-margin business,” stated Bear Stearns. “But we think [ArvinMeritor] shares have reflected a lot of optimism about the potential growth trajectory in emissions. All considered, we’re struggling to understand [ArvinMeritor’s] corporate strategy.”
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