Mergers & Acquisitions in the Global Valves Industry – April 2008

Dato

The economic environment in the valves industry continues to prove conducive for mergers and acquisitions despite the slow down in M&A activity in other industries. The fundamentals of the industry are still so strong that investors from both within and outside the sector are continuing to hunt for suitable targets. Trade tie-ups dominate as usual, whilst some industrial players are disposing of non-core assets in segments of the market that are experiencing slower growth.

Significantly, private equity firms continue to sit on huge funds which they need to invest irrespective of the availability of debt to support their buyouts. Private equity funds are keen to support entrepreneurs that wish to take niche players through the next stage of their growth. They are also prepared to structure transactions that allow private shareholders to extract value from companies that they have built-up over many years. Other buyout groups recognise that quoted industrial players that are in a state of flux make suitable take-private targets, with the private company scenario being much more suitable for corporate reorganisations than the public markets.

One such de-listing is the $173m acquisition of Koninklijke Econosto NV by Gilde Buy-Out Partners, a Dutch private equity firm with extensive experience of investing in mid-market businesses in the industrial products space. Econosto is a manufacturer and distributor of gasket, seals, valves and other industrial products which Gilde intends to strengthen through international growth including acquisitions in both the traditional MRO and project markets.

A corporate disposal of note in North America has seen Emerson Electric Co, the US supplier of process equipment and solutions, complete the sale of its Brooks Instrument division to American Industrial Partners, a US private equity firm that specializes in mid-market investments. Brooks is a supplier of flow control and measurement devices used in low-flow applications in the chemical and semiconductor industries, amongst others. The $100m sale of Brooks is part of Emerson’s strategy to focus its activities on other higher growth operations from where it can maximize its returns. The transaction follows Emerson’s exit from its joint venture interest in Industrial Motion Control LLC and its disposal of its Buehler materials testing subsidiary and Western Forge hand tool business.

Harsco Corp, the US supplier of industrial products and services, has also completed a significant corporate disposal with the sale of its Taylor-Wharton division to Wind Point Partners, a US private equity firm. The $340m deal involves the former GasServ division of Harsco which focuses on the supply of cryogenic bulk tanks, high pressure cylinders, LNG tanks, pressure vessels and valves used in gas delivery systems. Its includes Sherwood Valves which manufactures a range of valves for compressed gas applications in the chemical, HVAC, LPG, manufacturing, medical, semiconductor and transportation industries.

Elsewhere in North America, Rexnord LLC has acquired GA Industries Inc, a US manufacturer of automatic control valves, check valves, gate valves and other flow control products. The deal, which is being funded from Rexnord’s existing credit facilities, is valued at $76m. GA Industries, which includes Rodney Hunt Co, will expand Rexnord’s portfolio of water management products which is based around its February 2007 acquisition of Zurn Industries LLC. The combined businesses will have a strong market share in the North American market for cavitation, surge, waterhammer and other critical control products for the hydropower, sewage, waste and water industries.

Rotork plc, the UK manufacturer of actuators and controls, has expanded its Fluid Power division with the acquisition of Remote Controls Sweden AB, a Swedish designer and manufacturer of valve actuators. The $26m deal with enhance Rotork’s range of electric, hydraulic and pneumatic actuators for the nuclear, oil and gas, power generation, waste and water industries. As the same time, Rotork has acquired the Drallim SVM partial and full stroke valve testing operations of Drallim Group Ltd. The deal provides Rotork with a patented technology in the area of actuator and valve testing which includes electronic diagnostics. It will also complement Rotork’s products for safety critical applications which are proving to be a strong growth area for the group.

Hudaco Industries Ltd, the South African distributor of industrial, power transmission and security products, has acquired Astore Africa Pty Ltd, a South African supplier of thermoplastic pipe fittings, valves and other pipeline accessories. The $16m acquisition is complementary to Hudaco’s value-added distribution services. It will also contribute to the group’s strategy of responding to the strong demand from the agriculture, construction, mining and pharmaceutical industries in Southern Africa.

Looking forward to potential transactions in the making, the completion of the buyout of Valvitalia SpA by a consortium comprising Synergo Private Equity, Igi and Banca Leonardo will pave the way for the Italian valve manufacturer to make acquisitions. The group is particularly interested in complementary businesses operating in specialist niches that would fit within its model of providing a complete package of flow control equipment for the chemical, marine, oil and gas, petrochemical, power generation and water industries.

Another acquisitive group is AVK AS, the Danish manufacturer of automation components, couplings, flange adaptors, measurement tools, repair clamps and valves. It has over $200m for platform acquisitions in related markets that complement its existing range of valves for the energy, oil and gas, shipbuilding and water industries.

For more information on mergers and acquisitions activity in the valve industry, contact Constantine Biller our industrial products analyst who has unparalleled links to corporate decision-makers in the worldwide flow technologies and valves industry.

Visit our Industrial Products sector page.