425: Cummins Launches Exchange Offer for Atmus Filtration Technologies Shares

Cummins Inc. has commenced an exchange offer to trade up to 67,054,726 shares of Atmus Filtration Technologies Inc. common stock for outstanding shares of Cummins common stock.

Summary

• Cummins Inc. is offering to exchange up to 67,054,726 shares of Atmus Filtration Technologies Inc. common stock for Cummins common stock.
• The exchange offer commenced on February 14, 2024.
• The offer allows Cummins shareholders to exchange their shares for Atmus shares at a 7% discount, subject to an upper limit of 13.3965 Atmus shares per Cummins share.
• For each $100 of Cummins Common Stock accepted in the Exchange Offer, you will receive approximately $107.53 of Atmus Common Stock, subject to an upper limit of 13.3965 shares of Atmus Common Stock per share of Cummins Common Stock.
• The value of the stocks will be determined using the average daily volume-weighted average prices (VWAPs) of both Cummins and Atmus shares during the three-day Averaging Period.
• The Averaging Period, if the Exchange Offer is not extended or terminated, would be March 7, 8 and 11 2024.
• Indicative exchange ratios will be provided daily, reflecting whether the upper limit would be in effect.
• The final exchange ratio will be announced on March 13, 2024, and the exchange offer expires at midnight on the same day, unless extended.
• If the offer is oversubscribed, shares will be accepted on a pro rata basis, with an exception for 'odd-lots' (less than 100 shares).
• If not all Atmus shares are exchanged, Cummins intends to distribute the remaining shares to its shareholders in a tax-free 'clean-up spin-off'.
• The completion of the Exchange Offer is subject to certain conditions as specified in the Prospectus.

Sentiment

Score: 7

Explanation: The document outlines a standard corporate action (exchange offer) with clear terms. The sentiment is neutral to slightly positive, as it provides an opportunity for shareholders to adjust their holdings.

Positives

• Cummins shareholders have the opportunity to acquire Atmus shares at a 7% discount.
• The potential for a tax-free distribution of remaining Atmus shares if the exchange offer is not fully subscribed could benefit Cummins shareholders.
• Odd-lot holders (less than 100 shares) will not be subject to proration if the offer is oversubscribed.

Negatives

• The exchange is subject to an upper limit, potentially reducing the value received for Cummins shares if the limit is in effect.
• If the Exchange Offer is oversubscribed and Cummins cannot accept all tenders of Cummins Common Stock at the exchange ratio, then all shares of Cummins Common Stock that are validly tendered wil l generally be accepted for exchange on a pro rata basis in proportion to the number of shares validly tendered.

Risks

• The value of Atmus and Cummins shares could fluctuate, impacting the attractiveness of the exchange offer.
• The exchange offer is subject to conditions that Cummins may waive, potentially altering the terms.
• If the upper limit is in effect, investors may receive less than $107.53 of Atmus Common Stock for each $100 of Cummins Common Stock that they tender, and they could receive much less.
• The Exchange Offer is intended to permit you to exchange your shares of Cummins Common Stock for shares of Atmus Common Stock at a 7% discount to the per-share value of Atmus Common Stock through an exchange ratio calcu lated as set forth in this prospectus subject to the upper limit describel:l below.

Future Outlook

Cummins intends to make a tax-free distribution to its shareholders of the shares of Atmus Common Stock that were oflerel:l but not exchanged in the Exchange Offer effected as a dividend on a pro rata basis (the 'clean-up spin-off') to holders of Cummins Common Stock as of the record date.

Industry Context

Companies often use exchange offers to divest holdings in subsidiaries or other entities, allowing shareholders to directly participate in the value transfer. This move allows Cummins to further separate from Atmus, which was spun off previously.

Comparison to Industry Standards

• Exchange offers are a fairly common method for companies to divest stakes in subsidiaries, with the 7% discount being within a typical range to incentivize participation.
• Similar transactions include [hypothetical example] Company X's exchange offer for its stake in Subsidiary Y, which offered a comparable discount and proration mechanism.

Stakeholder Impact

• Cummins shareholders are offered the opportunity to exchange their shares for Atmus shares.
• Atmus shareholders may see changes in the shareholder base as a result of the exchange offer.
• Cummins' strategic direction is further clarified by reducing its stake in Atmus.

Next Steps

• Cummins will provide daily VWAPs of both Cummins Common Stock and Atmus Common Stock during the pendency of the Exchange Offer.
• Cummins will announce the final exchange ratio on March 13, 2024.
• Cummins may extend the Exchange Offer in the circumstances described in 'The Exchange Offer Ex/ens/on; Amendment Extension or Amendment by Cummins' in the Prospectus.

Key Dates