Arvin and Meritor to Merge Creating a $7.5B Global Automotive Supplier
6 April 2000
Arvin and Meritor to Merge Creating a $7.5 Billion Leading Global Automotive Supplier
TROY, Mich., and COLUMBUS, Ind., April 6 Meritor
Automotive, Inc. and Arvin Industries, Inc. announced
today that the two companies have entered into a definitive agreement to
combine their businesses in a strategic merger of equals. The transaction
will create a premier global supplier of a broad range of integrated systems,
modules and components for light vehicle, commercial truck, trailer and
specialty original equipment manufacturers (OEMs) and related aftermarkets.
The new company, to be called ArvinMeritor, Inc., will have combined
revenues of $7.5 billion. It will be incorporated in Indiana and will have
its corporate headquarters in Troy, Mich. All its operating units will remain
at their current locations. The merger brings together two strong companies,
which by combining their financial and strategic strengths, complementary
products and businesses, technology and brand leadership, world-class
operations, management talent, and dedicated workforces, will strengthen their
ability to better serve their customers, add value for shareholders, and take
advantage of global market opportunities.
The combined product portfolio and technological expertise of the two
companies will support their goal of becoming a global provider of integrated
solutions for light and heavy vehicle undercarriage, drivetrain, exhaust and
aperture modules, and systems. The combination will also expand their light
and heavy vehicle systems product range and strengthen their presence in the
worldwide motor vehicle aftermarket.
Under the terms of the agreement, which has been approved by both boards
of directors, Arvin shareholders will receive 1.00 share of ArvinMeritor
common stock plus $2.00 of cash consideration for each share of Arvin common
stock. Meritor shareholders will receive 0.75 shares of ArvinMeritor common
stock for each share of Meritor common stock. Meritor shareholders will own
approximately 65.8 percent and Arvin shareholders will own approximately 34.2
percent of the combined company's shares.
ArvinMeritor expects to pay a quarterly cash dividend of $.22 per share
which is consistent with the current Arvin policy and reflects an increase to
the current Meritor policy. Except for cash received, the transaction will be
tax free to the shareholders of both companies, and the transaction will be
accounted for using the purchase method. The new company's fiscal year will
end September 30.
Larry Yost, 62, chairman and CEO of Meritor, will be the new company's
chairman and CEO, and Bill Hunt, 55, chairman and CEO of Arvin, will serve as
the new company's vice chairman and president. Together, they will comprise
the Office of the Chairman, which will directly oversee the company's
corporate staff functions, as well as the operations of its six business
groups, which include heavy vehicle systems, light vehicle systems, exhaust
systems, light vehicle aftermarket, heavy vehicle aftermarket and coil
coating.
The board of directors of the new company will be comprised of nine
members from the current Meritor board and nine members from the current Arvin
board, plus one new independent director agreed upon by the parties. The
respective boards have a plan pursuant to which Bill Hunt will succeed Larry
Yost as chairman and CEO upon Yost's retirement from these positions.
"The new company represents a perfect fit between two outstanding
enterprises and management teams," said Larry Yost, chairman and CEO of
Meritor. "Each enterprise has an excellent track record of growing earnings
and major accomplishments over the past few years. This merger of equals
allows all shareholders to benefit from the opportunities created by sharing
Arvin's and Meritor's strong leadership teams and operational best
practices. This type of transaction enables us to not only preserve the
current strengths of both companies, but also to leverage those complementary
strengths to our advantage, as we strive to improve shareholder value and
provide superior products and better service to our customers in the future."
Bill Hunt, chairman and CEO of Arvin said, "We share a common vision and
culture, and there are many similarities in the way we have individually
driven our businesses in the pursuit of continuous improvement and greater
shareholder value. We are confident that together -- on a combined platform
of total annual revenues of $7.5 billion and operating cash flow of more than
$400 million -- we will deliver outstanding value to our shareholders,
customers, employees and the communities in which we operate. We will achieve
our objectives through accelerated top-line growth derived from product
innovation, a focus on customer service, and the quick realization of sales
and cost-reduction synergies. Larry and I will be working together to ensure
that we realize the huge potential of our combined businesses.
"We have established aggressive financial goals for ArvinMeritor, and are
confident in our ability to meet them," Hunt continued. "Our long-term
financial goals are to grow sales organically by 10 percent and earnings per
share by 15 to 18 percent annually. We also are committed to managing
ArvinMeritor as a strong investment grade company, with an intense emphasis on
cash. We expect the merger to be accretive to net income in the first year
with aggregate pre-tax cost savings of approximately $50 million in fiscal
2001 and $100 million by fiscal 2003."
Yost said, "As soon as all required approvals have been received and the
transaction closes, the new company's combined workforce of 36,500 -- in 25
countries and 121 manufacturing locations -- will begin to collectively
solidify outstanding customer relationships. We will continue to support our
customers globally, with differentiated products and services, innovative
solutions and leading-edge technologies.
"Both companies have proven track records of successfully integrating
acquisitions," Yost said. "To build on these positive experiences, we have
established a joint team to plan and execute the post closing integration of
our two companies. The team will meet weekly with the Office of the Chairman
to review the progress of the integration, which we expect will be complete
within a year after closing. The integration team will focus on adopting best
practices from each company, such as the Arvin Total Quality Production System
(ATQPS) and Meritor's strategic envisioning process and lean manufacturing
initiatives. This will ensure success in achieving synergies, resulting
margin expansion and continuous improvement of every process within
ArvinMeritor."
The merger is subject to shareholder and regulatory approvals.
In addition to Bill Hunt and Larry Yost, other corporate officers of
ArvinMeritor will be:
Staff Functions:
-- Vernon G. Baker II, senior vice president, general counsel and
secretary
-- Larry D. Blair, senior vice president, administration
-- Gary L. Collins, senior vice president, human resources
-- Lin M. Cummins, senior vice president, communications
-- Juan L. De La Riva, senior vice president, corporate development and
strategy
-- Thomas A. Madden, senior vice president and chief financial officer
-- William M. Lowe, vice president and controller
-- A. R. Sales, vice president and treasurer
-- Diane M. Stelfox, vice president, corporate development
Operating Groups:
-- William K. Daniel, senior vice president and president, Light Vehicle
Systems, Aftermarket Products
-- Donald E. Ebert, senior vice president and president, Roll Coater,
Inc.
-- Thomas A. Gosnell, senior vice president and president, Heavy Vehicle
Systems Aftermarket Products
-- Prakash R. Mulchandani, senior vice president and president, Heavy
Vehicle Systems
-- Terry E. O'Rourke, senior vice president and president, Light Vehicle
Systems
-- Carl C. Soderstrom, senior vice president, Engineering, Quality and
Procurement
-- Wesley B. Vance, senior vice president and president, Exhaust Systems
In connection with the transaction, each company granted the other an
option on up to 19.9% of its outstanding shares exercisable in certain
circumstances.
Warburg Dillon Read and Merrill Lynch Pierce Fenner & Smith, Inc. have
acted as primary financial advisors and have issued fairness opinions to
Meritor and Arvin, respectively, in connection with this merger. In addition,
Bear Stearns and Lehman Brothers have acted as financial co-advisors to
Meritor and Arvin, respectively.
Meritor, with 1999 sales of $4.5 billion, is a global supplier of a broad
range of components and systems for commercial, specialty and light vehicle
OEMs and the aftermarket. Meritor consists of two businesses: Heavy Vehicle
Systems, a leading supplier of complete drivetrain systems and components for
medium- and heavy-duty trucks, trailers, and off-highway equipment and
specialty vehicles, including military, bus and coach, and fire and rescue;
and Light Vehicle Systems, a major supplier of roof, door, automotive body,
access control and suspension systems, and wheel products for passenger cars,
light trucks and sport utility vehicles. Meritor World Wide Web Site Address:
http://www.meritorauto.com
Arvin Industries, Inc., with 1999 sales of $3.1 billion, is a global
manufacturer of automotive components with more than 60 manufacturing
facilities and six technical centers located in 22 countries. Arvin is a
leading manufacturer of automotive exhaust systems; ride control products;
air, oil and fuel filters; and gas-charged lift supports. Their products are
sold under various trademarks including Arvin, Maremont, Timax, ANSA and ROSI
exhaust systems; Gabriel and RydeFX shock absorbers; Purolator filters; and
StrongArm gas-charged lift supports. Arvin Industries World Web Site Address:
http://www.arvin.com .
This news release contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those projected as a result of certain risks and
uncertainties, including but not limited to those detailed from time to time
in Meritor's and Arvin's Securities and Exchange Commission filings. Such
risks and uncertainties also include: materially adverse changes in economic
conditions in the markets in which the companies operate; costs related to the
merger; substantial delay in the expected closing of the merger; and the risk
that Meritor's and Arvin's businesses will not be integrated successfully.