425: Cummins Launches Exchange Offer for Atmus Filtration Technologies Shares

Cummins Inc. has commenced an exchange offer to allow its shareholders to exchange their Cummins common stock for shares of Atmus Filtration Technologies Inc. at a 7% discount, subject to an upper limit.

Summary

• Cummins Inc. is offering to exchange up to 67,054,726 shares of Atmus Filtration Technologies Inc. common stock for outstanding shares of Cummins common stock.
• The exchange offer provides a 7% discount to the per-share value of Atmus common stock, with an exchange ratio calculated as described in the prospectus.
• There is 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 by the average daily volume-weighted average prices (VWAPs) of Cummins and Atmus common stock on the NYSE during the three consecutive trading days ending on and including the second trading day immediately preceding the expiration date of the Exchange Offer.
• The averaging period, if the Exchange Offer is not extended or terminated, would be March 7, 8 and 11 2024.
• Cummins will provide daily VWAPs of both stocks on the website www.okapivote.com/CumminsAtmusExchange.
• The final exchange ratio will be announced on March 13, 2024, and the Exchange Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on March 13, 2024, unless extended or terminated.
• If the Exchange 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 make a tax-free distribution (clean-up spin-off) of the remaining shares to its shareholders.
• The completion of the Exchange Offer is subject to certain conditions as specified in the Prospectus.

Sentiment

Score: 6

Explanation: The document is neutral in tone, outlining the terms of the exchange offer. The potential benefits of the discount are balanced by the risks of proration and the upper limit on the exchange ratio.

Positives

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

Negatives

• The upper limit on the exchange ratio could result in shareholders receiving less than the anticipated $107.53 of Atmus stock for each $100 of Cummins stock.
• If the Exchange Offer is oversubscribed, shares will be accepted on a pro rata basis, potentially reducing the number of Atmus shares received.
• Shareholders who tender their shares in the Exchange Offer will not participate in the clean-up spin-off of any remaining Atmus shares.

Risks

• The value of Atmus and Cummins shares could fluctuate during the averaging period, affecting the final exchange ratio.
• The Exchange Offer is subject to certain conditions, and Cummins may waive these conditions, potentially altering the terms of the offer.
• The upper limit on the exchange ratio could be triggered, reducing the value received by tendering shareholders.
• The Exchange Offer may be extended or terminated, causing uncertainty for shareholders.

Future Outlook

Cummins may extend the Exchange Offer and intends to make a tax-free distribution of any remaining Atmus shares if the offer is not fully subscribed.

Industry Context

This exchange offer is a strategic move by Cummins to divest its stake in Atmus Filtration Technologies, potentially allowing Cummins to focus on its core business while providing its shareholders with an opportunity to invest directly in Atmus.

Comparison to Industry Standards

• Spin-offs and exchange offers are common strategies for companies to divest non-core assets and unlock shareholder value.
• Similar transactions include DowDuPont's spin-off of Corteva Agriscience and HP Enterprise's spin-off and merger with Micro Focus.
• The 7% discount offered in this exchange is within the typical range for such transactions, but the upper limit on the exchange ratio could impact the overall value received by shareholders.

Stakeholder Impact

• Cummins shareholders have the opportunity to exchange their shares for Atmus shares at a discount.
• Atmus will become a more independent entity.
• The transaction could impact the trading volume and price of both Cummins and Atmus shares.

Next Steps

• Shareholders should review the Prospectus and other relevant documents before making an investment decision.
• Cummins will provide daily VWAPs of both stocks on the website.
• The final exchange ratio will be announced on March 13, 2024.

Key Dates