Canadian-based Westport Innovations Inc. and New York City-based Fuel Systems Solutions Inc. are merging their respective alternative fuel equipment companies into a new entity, Westport Fuel Systems, headquartered in Vancouver, BC.
The merged company would have a new business unit, Fuel Systems Automotive and Industrial Group. Closing is anticipated by the end of the year.
The publicly traded companies said the transaction would result in combined equity value of $351 million with estimated combined annual revenues ranging from $380 million to $405 million in 2015. They expect $30 million annually in synergies starting next year, and by 2018 expect up to $50 million of annual synergies.
Established in 1995, Westport engineers low-emission fuel system and vehicle technologies using natural gas and other gaseous fuels for both transportation and industry. Similarly U.S.-based Fuel Systems designs, manufactures and supplies alternative fuel components and systems for both transportation and industrial applications using compressed natural gas (CNG) and propane (LPG).
The merger combines 17 brands in the automotive and industrial sectors and would consolidate technologies and expand product portfolios, original equipment manufacturer (OEM) relationships, and global distribution network, a Westport spokesperson said. The new company would operate in more than 70 countries.
Under the terms of the deal, Fuel Systems shareholders would receive for each of their common shares 2.129 Westport shares, which the companies said was a 10% premium. Westport shareholders would hold about 64% of the combined company.
One of several complementary factors in the proposed merger is Westport's traditional focus on the heavy duty and high horsepower arena, while Fuel Systems has concentrated on light- and medium-duty products for both the automotive and industrial sectors. "The complementary industry expertise provides a compelling rationale for the merger as the combined company's product development efforts will span passenger car to heavy duty trucks to locomotives and marine applications to stationary power," the spokesperson said.
Westport CEO David Demers, who is to run the merged company, said both organizations are "rich" in technology innovation and proven track records for manufacturing, production and sales. The combination would “provide greater breadth of alternative fuel systems solutions" for OEMs globally. The scale of products is expected to ramp up even as facilities are consolidated.
Retiring Fuel Systems CEO Mariano Costamagna, who is to be a senior adviser and board member, said the merged company would mean "increased scale and relevance...We are confident we have found the right partner."