Westport's Strategic Shift: Divestment of Light-Duty Segment

Westport Fuel Systems Announces Strategic Divestiture

VANCOUVER, British Columbia – Westport Fuel Systems Inc. (TSX:WPRT / Nasdaq:WPRT) has successfully entered into a definitive agreement to divest its interest in the Light-Duty segment, part of its wider strategy to enhance future growth and operational focus. This sale marks a pivotal moment for the company, as it transitions towards a more specialized role within the alternative fuel systems sector.

Details of the Transaction

The agreement sees Westport selling its interest in Westport Fuel Systems Italia S.r.l., which encompasses the Light-Duty business, including both OEM and independent aftermarket activities, to a fully-owned investment entity of Heliaca Investments Coöperatief U.A. The base purchase price for this transaction is set at $73.1 million, with provisions for potential earn-outs totaling an estimated $6.5 million based on specific performance criteria.

Strategic Focus on Decarbonization

With this sale, Westport is shifting its concentration towards innovative solutions aimed at hard-to-decarbonize mobility and industrial applications. The divestiture not only strengthens the company's balance sheet but also extends its runway to pursue strategic acquisitions that align with its vision of providing affordable, sustainable fuel options. This focus is fueled by the unique capabilities of the company’s HPDI technology and its ongoing Cespira joint venture.

Future Growth and Operational Efficiency

According to Dan Sceli, Chief Executive Officer of Westport Fuel Systems, this transition is a significant milestone in the company’s evolution as an enterprise dedicated to alternative fuel systems. The divestment will help streamline operations and allow Westport to concentrate on areas where it can continue to innovate and create value. By shedding the Light-Duty segment, the company aims to enhance its operational efficiency and is excited about future opportunities in developing and providing alternative fuel solutions.

Addressing Market Demands

The proposed divestiture serves as a key strategy for Westport to focus on competitive advantages within the heavy-duty truck, off-road, and industrial markets. The company recognizes the potential role of hydrogen in future mobility solutions, while also leveraging its existing HPDI technology for immediate opportunities. As markets evolve towards lower-carbon solutions, Westport expects to play a vital role in facilitating this transition with its expertise in high-pressure fuel systems.

The Role of Natural Gas and Renewable Solutions

As the demand for renewable natural gas and sustainable solutions grows, Westport sees a unique market opportunity. The company’s established position within the natural gas segment, as well as ongoing advancements in renewable natural gas production, offers a promising avenue for expansion, particularly in North America, where such solutions are gaining acceptance.

Capitalizing on Innovative Technologies

Westport’s future product offerings are not only positioned to meet current market needs but also prepared for the anticipated rise of hydrogen adoption. The company’s High-Pressure Controls and Systems segment is rapidly developing natural gas solutions conducive for heavy-duty applications, aligning with both immediate and future goals for reducing carbon emissions.

Advisors Involved in the Transaction

Westport enlisted J.P. Morgan as its financial advisor, providing a fairness opinion to its board in connection with the transaction. Legal advisory roles have been filled by Bennett Jones LLP and Delfino Willkie, while E&Y serves as the company's tax advisor. On the flip side, Heliaca Investments was supported by a team of advisors, including Gianni & Origoni and NautaDutilh, among others.

About Westport Fuel Systems

Westport Fuel Systems is recognized as a leader in supplying advanced fuel delivery components and systems for clean and low-carbon fuels including natural gas and hydrogen. With a global footprint that spans across North America, Europe, and Asia, the company is dedicated to innovation in addressing climate change challenges associated with transportation. Through its focus on clean technologies, Westport is advancing toward a cleaner and more sustainable future.

Frequently Asked Questions

What does the agreement entail for Westport Fuel Systems?

The agreement signifies the sale of Westport's Light-Duty segment to Heliaca Investments for $73.1 million, allowing the company to refocus on core competencies in alternative fuel solutions.

How will this divestiture impact Westport's future?

This transaction is expected to strengthen Westport's financial position and enable further investment in growth initiatives focused on decarbonization and innovation.

What technologies is Westport focusing on post-divestiture?

Westport plans to concentrate on advancing its HPDI technology and exploring opportunities in hydrogen solutions, alongside its offerings in natural gas and renewable fuel technologies.

Who are the advisors involved in this transaction?

J.P. Morgan serves as Westport’s financial advisor, while Bennett Jones LLP and Delfino Willkie provide legal advice. E&Y acts as the tax advisor.

What is the strategic advantage of this divestiture?

By divesting the Light-Duty segment, Westport aims to enhance operational efficiency and concentrate on high-potential areas within decarbonization and alternative fuel technologies.

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