(Reuters) – U.S. truck engine maker Cummins Inc said on Tuesday it will acquire auto parts maker Meritor Inc for $2.58 billion in cash, to expand its engine offerings and add axle and brake products to its portfolio.

Cummins’ offer of $36.50 per Meritor share represents a premium of 48% to its Friday’s close.

Meritor shares were up 43% before the bell.

The deal, which is valued at $3.7 billion on an enterprise basis, will be paid for using cash and debt, Cummins said.

The company added the merger is expected to generate savings of about $130 million in the third year after closing.

(This story corrects paragraph 2 to say a premium of 48% and not 49.5%.)

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