Meritor Declines After $150 Million Debt Offering

Meritor Inc. (MTOR), a maker of axles and brakes for trucks and buses, fell the most in seven weeks after the company proposed a $150 million convertible debt offering, raising investor concerns that the shares would be diluted.

Meritor dropped 7.6 percent to $3.89 at 11:51 a.m. in New York after reaching $3.83, for the biggest intraday decline since Oct. 10. The shares had dropped 21 percent this year through yesterday.

Meritor said in a statement today it plans to offer notes due 2026 convertible into stock and may grant purchasers $22.5 million more of debt. The Troy, Michigan-based company had 96.5 million shares outstanding as of Nov. 7.

“I would guess it is dilution from the convertible offering,” David Leiker, an analyst at Robert W. Baird & Co. in Milwaukee, said in an e-mail of today’s decline in Meritor shares.

Convertible debt under certain conditions can be converted by the holder into the company’s stock, increasing the number of shares outstanding.

To contact the reporter on this story: Mark Clothier in Southfield, Michigan at mclothier@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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