Gentherm and Modine's Performance Technologies Business to Combine, Establishing a Scaled Leader in Thermal Management Solutions

Core Viewpoint - Gentherm and Modine have entered into a definitive agreement for a Reverse Morris Trust transaction, where Modine will spin off its Performance Technologies business and combine it with Gentherm, creating a tax-free structure for Modine and its shareholders [1][2][3]. Group 1: Transaction Overview - The transaction is valued at approximately $1.0 billion, representing a multiple of about 6.8x LTM post-synergy adjusted EBITDA of $147 million [3][5]. - Modine is expected to receive a cash distribution of $210 million from SpinCo, with shareholders receiving approximately 21 million shares of Gentherm common stock, equating to about $790 million [3][11]. - Following the transaction, Modine shareholders will own approximately 40% of the combined company, while Gentherm shareholders will own about 60% [3][11]. Group 2: Strategic Benefits - The transaction will establish Gentherm as a scaled leader in thermal management solutions, enhancing its capabilities in precision flow management and allowing it to serve attractive end markets such as power generation and commercial vehicles [2][7]. - The combined company is expected to realize approximately $25 million in annual cost synergies through operational efficiencies and cost optimization [11][7]. - Modine will focus on becoming a pure-play climate solutions company, targeting high-growth markets such as data center cooling, with anticipated annual growth of 50% to 70% over the next two years [6][11]. Group 3: Financial Profile - The combined company is projected to generate pro forma revenue of $2.6 billion, with an adjusted EBITDA margin of 13% on a synergy-adjusted basis and a net leverage ratio of approximately 1.0x [2][11]. - Modine's Climate Solutions segment generated $1.6 billion in revenue for the twelve months ended September 30, 2025, with expectations to approach $2 billion for Fiscal 2026 [11][6]. - The transaction is expected to be accretive to adjusted EPS by year two, preserving Gentherm's strong balance sheet and providing capital allocation flexibility for future investments [11][7]. Group 4: Leadership and Structure - Bill Presley will serve as CEO and Jon Douyard as CFO of the combined company, with Modine Performance Technologies operating as a division of Gentherm [10][12]. - The transaction is expected to close in the fourth quarter of calendar year 2026, subject to various approvals [9][11].