Quarterly report pursuant to Section 13 or 15(d)

Atmus Divestiture

v3.24.3
Atmus Divestiture
 9 Months Ended
Sep. 30, 2024
Business Acquisition [Line Items]  
Mergers, Acquisitions and Dispositions Disclosures
NOTE 15. ACQUISITIONS
Acquisitions for the nine months ended September 30, 2024 and 2023, were as follows:
Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Acquisition Related Debt Retirements Total Purchase Consideration
Type of Acquisition(1)
Goodwill Acquired
Intangibles Recognized(2)
2024
Engendren Corporation 02/16/24 100% $ 65  $ —  $ 65  COMB $ 33  $ 8 
2023 (3)
Hydrogenics Corporation 06/29/23 19% $ 287  $ 48  $ 335 
(4)
 EQUITY $ —  $ — 
Teksid Hierro de Mexico, S.A. de C.V. 04/03/23 100% 143 —  143 COMB 18 — 
(1) All results from acquired entities were included in segment results subsequent to the acquisition date. Previously consolidated entities were accounted for as equity transactions (EQUITY). Newly consolidated entities were accounted for as business combinations (COMB).
(2) Intangible assets acquired in the business combination were mostly customer and trade name related.
(4) Hydrogenics entered into three non-interest-bearing promissory notes with $175 million paid on July 31, 2023, and the remaining $160 million due in three installments through 2025.
Atmus Filtration Technologies Inc.  
Business Acquisition [Line Items]  
Mergers, Acquisitions and Dispositions Disclosures
IPO
On May 23, 2023, in connection with the Atmus IPO, Cummins issued approximately $350 million of commercial paper with certain lenders. On May 26, 2023, Atmus shares began trading on the New York Stock Exchange under the symbol "ATMU." The IPO was completed on May 30, 2023, whereby Cummins exchanged 19.5 percent (approximately 16 million shares) of its ownership in Atmus, at $19.50 per share, to retire $299 million of the commercial paper as proceeds from the offering through a non-cash transaction.
In connection with the completion of the IPO, through a series of asset and equity contributions, we transferred the filtration business to Atmus. In exchange, Atmus transferred consideration of $650 million to Cummins, which consisted primarily of the net proceeds from a term loan facility and revolver executed by Atmus during May 2023. The commercial paper issued and retired through the IPO proceeds, coupled with the $650 million received, was used for the retirement of our historical debt and payment of dividends. The difference between the commercial paper retired from the IPO, other IPO related fees and the net book value of our divested interest was $285 million and recorded as an offset to additional paid-in capital. Of our consolidated cash and cash equivalents at December 31, 2023, $166 million was retained by Atmus for its working capital purposes.
Divestiture
On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus common stock through a tax-free split-off. The transaction involved the exchange of our shares in Atmus for shares of Cummins stock with a 7.0 percent discount on the exchange ratio for Atmus shares. The exchange ratio was determined based on each entity's respective stock price using the daily volume weighted-average stock price for three days preceding the final exchange offer date. Based on the final exchange ratio, we exchanged all 67 million of our Atmus shares for 5.6 million shares of Cummins stock, which was recorded as treasury stock based on the fair value of the Cummins shares obtained.
We evaluated the full divestiture of Atmus and determined the transaction did not qualify for discontinued operation presentation. We recognized a gain related to the divestiture of approximately $1.3 billion (based on the difference between the fair value of the Cummins shares obtained less the carrying value of our Atmus investment), which was recorded in other income, net in the Condensed Consolidated Statements of Net Income for the nine months ended September 30, 2024. Approximately $114 million of goodwill was included in the carrying value of the Atmus investment for purposes of calculating the gain. The operating results of Atmus were reported in the Condensed Consolidated Financial Statements through March 18, 2024, the date of divestiture.
As part of the divestiture, the $600 million term loan remained with Atmus after the split. In addition, a net $61 million of other comprehensive income and $19 million of noncontrolling interests related to Atmus were written-off and netted against the gain recognized upon the split.
We entered into a transitional services agreement (TSA) with Atmus that is designed to facilitate the orderly transfer of various services to Atmus. The TSA relates primarily to administrative services, which are generally to be provided over the next 24 months. This agreement is not material and does not confer upon us the ability to influence the operating and/or financial policies of Atmus subsequent to March 18, 2024.