Cummins Launches Exchange Offer for Separation of Atmus Filtration Technologies Inc.
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Insights
The announcement by Cummins Inc. of an exchange offer to divest its remaining interest in Atmus Filtration Technologies Inc. represents a strategic realignment of the company's portfolio. This move will likely be scrutinized for its potential to unlock shareholder value. The exchange offer is structured to provide Cummins shareholders with Atmus shares at a 7% discount, which could be perceived as an immediate financial incentive to participate. The stipulation of a tax-free exchange, barring cash in lieu of fractional shares, further enhances the appeal of the offer. However, the impact on Cummins' stock will depend on investor reception, the perceived future performance of Atmus and the execution of strategic initiatives post-separation.
From a valuation perspective, the determination of the exchange ratio based on the volume-weighted average prices (VWAP) of both companies' stocks over a specified period adds a layer of complexity. Investors will need to consider the potential volatility in stock prices leading up to the exchange date. The upper limit on the number of Atmus shares received per Cummins share ensures that the dilutive effect on Atmus' stock is contained, which could help maintain its value post-exchange. This transaction could serve as a catalyst for re-rating the stocks of both companies, as markets reassess their standalone prospects and growth trajectories.
The divestiture through an exchange offer reflects a broader trend in the market where conglomerates are simplifying their business models to focus on core competencies. For Cummins, shedding its stake in Atmus allows for a sharper focus on its strategic initiatives, which may include investing in new technologies or doubling down on its primary market segments. The market's response to this divestiture will serve as a barometer for the attractiveness of focused versus diversified business models in the current economic climate.
Atmus, on the other hand, stands to benefit from increased autonomy and the ability to pursue growth strategies tailored specifically to the filtration industry. This could potentially lead to more agile decision-making and targeted investments that drive innovation. Investors will monitor Atmus's performance closely, as its success as an independent entity will be indicative of the potential for specialized firms to carve out significant market share in niche segments.
The exchange offer's reliance on a favorable tax opinion and the requirement that a minimum number of shares be distributed are legal stipulations that safeguard the interests of both Cummins and its shareholders. The tax-free nature of the transaction, except for cash received in lieu of fractional shares, is a significant consideration for shareholders evaluating the offer. It is essential that the exchange offer complies with the stipulations set forth by the IRS to maintain its tax-advantaged status.
Furthermore, the regulatory filings with the SEC, including the registration statement on Form S-4 by Atmus and the tender offer statement on Schedule TO by Cummins, will provide shareholders with detailed information regarding the terms of the exchange. These filings are designed to ensure transparency and allow shareholders to make informed decisions based on comprehensive disclosures. The role of Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC as dealer managers also underscores the importance of expert financial guidance in navigating complex transactions of this nature.
“This separation will create value for both Cummins and Atmus, allowing Cummins to continue its focus on key strategic initiatives and innovating in both core and new technologies, while allowing the filtration business the ability to operate and grow with flexibility,” said Cummins Chair and CEO Jennifer Rumsey. “Leveraging its advanced filtration technologies and capabilities, Atmus is well positioned to grow into new markets and help both existing and new customers be successful. We believe now is the right time to distribute our Atmus shares, and we are confident that the share exchange is the appropriate path forward to bring the greatest value to shareholders. I am excited to see what the future holds for the company.”
The exchange offer is expected to permit Cummins shareholders to exchange all or a portion of their shares of Cummins common stock for shares of Atmus common stock at a
Cummins will determine the prices at which shares of Cummins common stock and shares of Atmus common stock will be exchanged by reference to the arithmetic average of the daily volume-weighted average prices of shares of Cummins common stock and Atmus common stock on the NYSE during the three consecutive trading days ending on and including the second trading day preceding the expiration date of the exchange offer, which would be March 7, 8 and 11, 2024, if the exchange offer is not extended or terminated. The final exchange ratio, reflecting the number of shares of Atmus common stock that tendering shareholders will receive for each share of Cummins common stock accepted in the exchange offer, will be announced by press release by 5:30 p.m.,
The completion of the exchange offer is subject to certain conditions, including: at least 33,527,363 shares of Atmus common stock being distributed in exchange for shares of Cummins common stock validly tendered in the exchange offer; and the receipt of an opinion of counsel that the exchange offer will qualify for tax-free treatment to Cummins and its participating stockholders.
Cummins currently owns 67,054,726 shares of Atmus common stock, representing approximately
Shareholders should reach out to their respective broker or provider for more information. Participation is voluntary and must be done by the established deadlines. No action is necessary for Cummins shareholders who choose not to participate.
The terms and conditions of the exchange offer will be outlined in a registration statement on Form S-4 to be filed by Atmus with the Securities and Exchange Commission (the “SEC”) and a tender offer statement on Schedule TO to be filed by Cummins with the SEC today.
Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC will serve as dealer managers for the exchange offer.
For questions about the exchange offer, please contact the Exchange Offer Helpline at 1-877-279-2311 (in the
About Atmus Filtration Technologies Inc.
Atmus Filtration Technologies Inc. is a global leader in filtration and media solutions. For more than 65 years, the company has combined its culture of innovation with a rich history of designing and manufacturing filtration solutions. With a presence in more than 140 countries on six continents, Atmus serves customers across truck, bus, agriculture, construction, mining, marine and power generation vehicle and equipment markets, along with comprehensive aftermarket support and solutions. Headquartered in
About Cummins Inc.
Cummins Inc., a global power leader, is a corporation of complementary business segments that design, manufacture, distribute and service a broad portfolio of power solutions. Headquartered in
Forward-Looking Statements
This communication contains certain statements about Cummins and Atmus that are forward-looking statements. Forward-looking statements are based on current expectations and assumptions regarding Cummins’ and Atmus’ respective businesses, the economy and other future conditions. In addition, the forward-looking statements contained in this communication may include statements about the expected effects on Cummins and Atmus of the exchange offer, the anticipated timing and benefits of the exchange offer, Cummins’ and Atmus’ anticipated financial results, and all other statements in this communication that are not historical facts.
Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and are detailed more fully in Cummins’ and Atmus’ respective periodic reports filed from time to time with the
Additional Information and Where to Find It
This communication is for informational purposes only and is not an offer to sell or exchange, a solicitation of an offer to buy or exchange any securities and a recommendation as to whether investors should participate in the exchange offer. If the exchange offer is commenced, Atmus will file with the SEC a registration statement on Form S-4 (the “Registration Statement”) that will include a prospectus (the “Prospectus”). There can be no assurances that Cummins will commence the exchange offer on the terms described in this document or at all. The exchange offer will be made solely by the Prospectus. The Prospectus will contain important information about the exchange offer, Cummins, Atmus and related matters, and Cummins will deliver the Prospectus to holders of Cummins common stock. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, WHEN THEY BECOME AVAILABLE AND BEFORE MAKING ANY INVESTMENT DECISION, BECAUSE THEY CONTAIN IMPORTANT INFORMATION. None of Cummins, Atmus or any of their respective directors or officers or the dealer managers appointed with respect to the exchange offer makes any recommendation as to whether you should participate in the exchange offer.
Cummins will file with the SEC a Schedule TO, which will contain important information about the exchange offer.
Holders of Cummins common stock may obtain copies of the Prospectus, the Registration Statement, the Schedule TO and other related documents, and any other information that Cummins and Atmus file electronically with the SEC free of charge at the SEC’s website at http://www.sec.gov. Holders of Cummins common stock will also be able to obtain a copy of the Prospectus by clicking on the appropriate link on www.okapivote.com/CumminsAtmusExchange.
Cummins has retained Okapi Partners LLC as the information agent for the exchange offer. To obtain copies of the exchange offer Prospectus and related documents, or for questions about the terms of the exchange offer or how to participate, you may contact the information agent at 1-877-279-2311 (in the
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Investor Relations:
Chris Clulow
christopher.clulow@cummins.com
investor.relations@cummins.com
Media Relations:
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Source: Cummins Inc.
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