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 includes a 7% discount to the per-share value of Atmus Common Stock, with an exchange ratio calculated as described in the prospectus.
• For each $100 of Cummins Common Stock accepted, investors 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 by the average daily volume-weighted average prices (VWAPs) of Cummins and Atmus common stock during the three 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 on the website www.okapivote.com/CumminsAtmusExchange.
• The final exchange ratio will be announced by press release and on the website by 5:30 p.m. New York City time, on the second trading day immediately preceding the expiration date of the Exchange Offer, which, if not extended or terminated, would be March 13, 2024.
• 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 oversubscribed, shares will be accepted on a pro rata basis, with exceptions for odd-lot holders (less than 100 shares).
• If not fully subscribed, Cummins intends to make a tax-free distribution (clean-up spin-off) of the remaining Atmus shares to Cummins shareholders.
• The completion of the Exchange Offer is subject to certain conditions as specified in the Prospectus.
• Okapi Partners LLC is the information agent for the exchange offer.

Sentiment

Score: 6

Explanation: The document is neutral in tone, outlining the terms of the exchange offer. The potential benefits of the offer are balanced by the risks and limitations, resulting in a moderate sentiment score.

Positives

• Cummins shareholders have the opportunity to exchange their shares for Atmus shares at a 7% discount.
• The potential for a clean-up spin-off provides an additional avenue for shareholders to receive Atmus shares if the exchange offer is not fully subscribed.
• Odd-lot holders (less than 100 shares) will not be subject to proration, ensuring their tenders are fully accepted.

Negatives

• There is an upper limit of 13.3965 shares of Atmus Common Stock per share of Cummins Common Stock, which may result in receiving less than $107.53 of Atmus Common Stock for each $100 of Cummins Common Stock tendered.
• If the Exchange Offer is oversubscribed, shares will be accepted on a pro rata basis, potentially reducing the number of Atmus shares received.
• Holders of Cummins Common Stock validly tendered and accepted and exchanged in the Exchange Oller will not participate in the clean-up spin-off (unless they otherwise own shares of Cummins Common Stock that were not tendered and accepted for exchange in the Exchange Oller as of the relevant record date).

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.
• Forward-looking statements are subject to uncertainties, risks, and changes in circumstances that could cause actual results to differ materially.

Future Outlook

Cummins intends to make a tax-free distribution (clean-up spin-off) of any remaining Atmus shares to Cummins shareholders if the exchange 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 businesses 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.
• The 7% discount offered in the exchange is within the typical range for such transactions, but the upper limit on the exchange ratio could reduce the attractiveness of the offer if Atmus's stock price appreciates significantly relative to Cummins's stock price.

Stakeholder Impact

• Cummins shareholders have the opportunity to exchange their shares for Atmus shares.
• Atmus will become a more independent entity.
• The exchange offer could impact the trading volumes and prices of both Cummins and Atmus shares.

Next Steps

• Cummins will provide daily VWAPs of Cummins and Atmus common stock on the website.
• The final exchange ratio will be announced on March 13, 2024, if the Exchange Offer is not extended or terminated.
• Cummins will determine if a clean-up spin-off is necessary and announce the record date if applicable.

Key Dates