Shares of Westport Innovations Inc. (NASDAQ: WPRT) and Fuel Systems Solutions Inc. (NASDAQ: FSYS) made moves in the market on Tuesday after both companies announced they had entered into a merger agreement to create a premier alternative fuel vehicle and engine company.
This newly combined company will conduct business in more than 70 countries and will trade under Westport’s ticker on the Nasdaq.
Under the terms of the merger, Westport will acquire all the outstanding shares of Fuel Systems common stock in a stock-for-stock transaction. Fuel Systems shareholders will receive 2.129 Westport shares for each share of Fuel Systems common stock they own at the closing of the deal. This represents a 10% premium to Fuel Systems shareholders based on the closing trading prices of Westport’s and Fuel Systems’ shares on August 31 — an implied value to Fuel Systems shareholders of $7.54 per share.
Ultimately this transaction will result in a combined equity value of $351 million based on the closing trading prices for the shares of both companies on August 31.
This merger will combine 17 brands in the automotive and industrial space and allow customers as well as stakeholders to benefit from the consolidation of technologies and the expansion of product portfolios, original equipment manufacturer (OEM) relationships and global distribution networks.
After the transaction closes, Westport shareholders will hold roughly 64% of the combined company, and Fuel Systems shareholders 36% of the combined company on a fully diluted basis.
David Demers, CEO of Westport, commented on the merger:
The merger of these two organizations, both rich in technology innovation and with proven track records of manufacturing, production and sales, will provide greater breadth of alternative fuel systems solutions as products and development engineering to OEM partners globally. 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. This transaction marks a milestone in our strategic plans, whereby Westport will realize increased sales and significant cost efficiency opportunities while continuing to focus on the development, validation and launch of its proprietary Westport(TM) HPDI 2.0 and enhanced spark ignition technology.
Shares of Westport were down 4.5% at $3.38 on Tuesday morning. The stock has a consensus analyst price target of $5.45 and a 52-week trading range of $3.00 to $14.41.
Fuel Systems shares were down 0.4%, at $6.82 in its 52-week trading range of $5.70 to $11.88. The consensus analyst price target is $9.38.