ACQUISITIONS

Fabco

On August 31, 2017, the company acquired certain assets, including the product portfolio and related technologies of Fabco Holdings, Inc. and its subsidiaries ("Fabco") and assumed certain liabilities, for a cash purchase price of $34 million. The Fabco acquisition was accounted for as a business combination.

With the addition of Fabco's suite of products, Meritor will have an expanded portfolio of complementary products, including transfer cases, specialty gear boxes, auxiliary transmissions and power take off units for medium, heavy and extra heavy vehicles for on- and off-highway, construction, defense, rail and other industrial applications. These products are available to both OE and aftermarket customers. This transaction allows the company to offer global customers a wider breadth of capabilities and an expanded portfolio of complementary products. The acquisition is expected to also help the company diversify its customer base and expand into the rail and oil & gas industries not currently served.

Pro forma financial information of the company is presented in the following table for the years ended September 30, 2017 and 2016 as if the Fabco acquisition had occurred on October 1, 2015. The pro forma financial information is unaudited and is provided for informational purposes only and does not purport to be indicative of the results which would have actually been attained had the acquisition occurred on October 1, 2015 (in millions).



	Pro Forma Combined
	Year Ended September 30,
	2017		2016
	(Unaudited)
Sales	$	3,388	$	3,242
Net income attributable to Meritor, Inc.	$	309	$	566

Actual amounts of revenue and earnings included in the consolidated financial statements for the year ended September 30, 2017 were not material.

The purchase price was allocated on a provisional basis as of August 31, 2017. Assets acquired and liabilities assumed were recorded at estimated fair values based on management's estimates, available information, and reasonable and supportable assumptions. Additionally, the Company is utilizing a third-party to assist with certain estimates of fair values.

The provisional purchase price allocation, which is subject to change and may be subsequently adjusted to reflect final valuation results and other adjustments, is shown below (in millions).



	August 31, 2017
Purchase price	$	34

Assets acquired and liabilities assumed
Receivables, net	5
Inventories, net	13
Net property	9
Accounts payable	(6		)
Other current liabilities	(6		)
Identifiable net assets acquired	15

Goodwill resulting from the acquisition of Fabco	19
	$	34

Provisional fair value of trademarks, intellectual property, and other intangible assets is not included in the provisional purchase price allocation table above as final valuations of those intangible assets are not complete. The company recorded provisional goodwill in the amount of $19 million for the excess of consideration paid over the fair value of the individual assets acquired and liabilities assumed, excluding identifiable intangible assets. This recorded goodwill consists largely of the synergies and economies of scale expected from combining the operations of the company and Fabco. All of the goodwill was assigned to the Commercial Truck & Industrial reportable segment. The assignment of goodwill to reporting units is not complete. All goodwill recognized is expected to be deductible for income tax purposes over the next 15 years. The company incurred acquisition related costs of $1 million as of September 30, 2017, which were recorded as incurred and have been classified as selling, general, and administrative expenses in the company's consolidated statement of operations for the year ended September 30, 2017.

Morganton

On July 9, 2015, the company purchased from Sypris Solutions, Inc. (“Sypris”), a supplier of axle shafts and trailer beams for Meritor and Sistemas Automotrices De Mexico S.A. de C.V., a joint venture that is 50%-owned by Meritor, the majority of the assets of Sypris’s Morganton, North Carolina manufacturing facility for $16 million cash consideration. The fair value of the net assets acquired was $16 million, which consisted mainly of property, plant and equipment. Of the equipment acquired, $2 million was classified as held for sale at the acquisition date and was recorded in net property as of September 30, 2015. The revenue and earnings of the combined entity as though the business combination had occurred as of the beginning of the comparable prior annual reporting period was insignificant to the consolidated financial statements as the majority of sales were eliminated upon consolidation.