Troy, Mich.-based Meritor (NYSE: MTOR ) is exiting its Brazilian joint venture with Randon S.A. Implementos E Participoes, it announced Monday -- and taking $195 million on its way out the door.
Meritor will sell its 50% stake in the Suspensys Sistemas Automotivos LTDA JV, which makes air and mechanical suspension systems for trucks, buses and trailers, trailer axles, third axles, hubs and drums for trucks, buses and trailers, to partner Randon for the named price. The parties are aiming for a fiscal year-end closing date.
Meritor says it will use the proceeds from the sale to strengthen its balance sheet, which is currently debt-heavy with about $921 million more debt than cash on the books.
The company did $470 million in fiscal 2012 business in South America, primarily in Brazil. Even if not all of this business originated at the JV, this still suggests a sales price of approximately 0.4x revenues on the JV -- a significant premium to the 0.1 P/S ratio that Meritor's own shares fetch on the NYSE.
Shares of Meritor climbed 5.6% in Monday trading, ahead of the announcement, to close at $4.75.
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