Canadian natgas engine maker Westport to buy Fuel Systems

(Reuters) - Canada's Westport Innovations Inc (Toronto:WPT.TO - News), which develops motor vehicle engines that run on natural gas, agreed to buy U.S. peer Fuel Systems Solutions Inc (NasdaqGS:FSYS - News) in an all-stock deal to diversify from engines for trucks and buses.

The deal comes at a time when the two companies try to cope with narrowing spread between natural gas fuels and diesel, due to a steep fall in crude prices, discouraging customers from converting to vehicles run on natural gas.

Fuel Systems shareholders will receive 2.129 Westport shares for each share held, representing a 10 percent premium to Monday's closing on the Nasdaq. The transaction works out to $7.54 per Fuel Systems share.

The merger would create a company with annual revenue of $380-$405 million in 2015, the companies said on Tuesday.

Westport focuses on engines for heavy-duty vehicles manufactured by companies including Volvo, Volkswagen and Fiat Chrysler Automobiles. Fuel Systems is geared toward light- and medium-duty products for customers including General Motors Co (NYSE:GM - News), Ford Motor Co (NYSE:F - News) and Mitsubishi Group.

(Reporting by Amrutha Gayathri in Bengaluru)