Westport, Fuel Systems Announce Merger
Westport Innovations Inc. and Fuel Systems Solutions Inc., suppliers of technology for natural gas-powered trucks, agreed on a merger valued at $351 million to capitalize on opportunities when alternative fuel markets improve.
The combination of Westport, based in Vancouver, British Columbia, and New York-based Fuel Systems Solutions is structured as a stock swap for two money-losing companies whose annual revenue could reach $405 million this year.
The announcement comes as expected sales of natural gas-powered heavy trucks for on-highway applications are expected to fall about 6% to around 3,300 this year compared with 2014, according to ACT Research, which tied the 2015 activity in the alternative-fuel sector to a sharp drop in diesel prices.
That change lengthened the payback period for natural-gas trucks, which account for barely 1% of all heavy truck sales, well below past projections when diesel was at or near record levels.
“We expect that the increased scale of products and consolidation of facilities will produce both cost efficiencies and enhanced products, ultimately creating value for all our customers and our shareholders,” Westport CEO David Demers said.
In the first half of this year, Westport and Fuel Systems lost a combined $43.7 million.
“Westport has a publicly stated goal of reaching break even by the middle of 2016, and the merger would only strengthen the company's ability to meet this goal,” the statement said.
Fuel Systems CEO Mariano Costamagna said, “Bringing together these two premier companies in alternative-fuel technology combines our technology expertise and long-standing relationships with global OEMs, our strong shared focus on improving profitability and aligns our corporate cultures, creating an ideal fit.”
The transaction includes a new business unit known as Fuel Systems Automotive and Industrial Group. The statement said there are 17 brands marketed in more than 70 countries through the combined businesses.
Fuel Systems holders will receive 2.129 Westport shares for each Fuel Systems share owned, worth about $7.54 per share. Westport shareholders will have a 64% stake in the company.
A fourth-quarter 2015 completion is expected.
The companies estimated $30 million of annual savings by 2018.
Demers will head the newly formed company, and Costamagna will serve as a senior advisor while also retiring.
