Mergers & Acquisitions in the Global Valves Industry – October 2008

Dato

Despite the turbulence in world economic markets over recent months M&A transactions in the valves industry have demonstrated resilience in uncertain times. Whilst not entirely immune to issues facing the banking sector, valve companies continue to operate in sectors which are experiencing positive dynamics.

Therefore, whilst credit lines for the biggest transactions have largely dried up, cash rich purchasers continue to make forays into fast growing segments of the market through smaller, targeted deals.

Once such example is the $28m acquisition of Delta Fluid Products Ltd by Crane Co. Delta Fluid Products is a UK manufacturer of fire safe valves and regulators for the natural gas industry, as well as air vent valves and safety valves for the building services and water markets. It supplies bronze valves and industrial pipe fittings under its Brownall brand and brass safety and pressure valves for commercial and industrial air, hot water and steam applications under its NABIC brand. The company also manufactures water safety valves under its IAT brand, sight flow indicators under the Rhodes and Universal Indicators brands, gas controls under its Sperryn brand and gas compression fittings under its Wade brand.

Delta will complement Crane’s products for the building services and natural gas markets and broaden the group’s portfolio of products for these sectors. The deal is particularly attractive to Crane as it already employs similar distribution channels for its Crane, Hattersley and Wask product lines. The transaction provides an exit for Delta’s senior management team who had originally acquired the company with support of GE Commercial Finance in February 2004.

At the same time, Curtiss-Wright Corp has acquired UK-based solenoids and solenoid valves manufacturing company Mechetronics Ltd for $2.8m. Mechetronics is a supplier of solenoids and solenoid valves used in a variety of applications including business machines, switchgear and vehicle braking systems. It will be integrated into Curtiss-Wright’s Motion Control division where it will complement the group’s expertise in solenoids for aerospace and defense applications. Curtiss-Wright will also benefit from Mechetronics’ new production facility in Zhuhai, China.

The demand for specialist operators in niche segments is further exemplified by IDEX Corp’s acquisition of Richter Chemie-Technik GmbH, a German supplier of control equipment, pumps and valves for the chemical, fine chemical and pharmaceutical industries. The company has a particular specialism in the development of corrosion-resistant fluoroplastic lined products used in demanding applications. The $101m acquisition will be integrated into IDEX’s Fluid and Metering Technologies division and will extend the group’s service capabilities for these key process industries.

With their relentless appetite for European-based businesses that deomstrate unique products and technologies, other diversified US groups in the flow and motion control sectors are also completing significant acquisitions. For instance, Parker Hannifin Corp has acquired Lingk & Sturzebecher GmbH, a German manufacturer of lightweight carbon fiber and high-pressure actuators and cylinders. The company operates in the composite technologies niche and serves the aerospace, mobile equipment and other industrial markets.

Lingk & Sturzebecher, which was already collaborating with Parker, will be integrated into the group’s hydraulic technology business where it will complement its portfolio of hydraulic components and systems which include cylinders, electronic controls, hydraulic drives, pumps and valves. The company’s composite material technologies will also enable Parker to bring energy control and recovery solutions to its hydraulic equipment.

Elsewhere in Europe, Farex Groupe SA has acquired GMR Robinetterie SA, a French distributor of flow control products and valves for the chemical, HVAC, food processing, metals, oil and gas, pharmaceutical, shipping and water industries. The acquisition will give Farex further routes to market for its portfolio of products which includes couplings, expansion joints, fasteners, fittings, flanges and pipe accessories. The group, which includes FG Inox and TECOFI, also manufactures ball, butterfly, check, diaphragm and knife gate valves for a range of industries.

Turning to transactions in South America, SGS SA has acquired PiD Group SA, a Brazilian provider of valve calibration, maintenance, testing, training and related consultancy services. The acquisition fulfils the Swiss-based group’s aim of expanding its operations in Latin America and will offer its Industrial Services division immediate access to the fast growing biofuels, manufacturing and offshore and onshore oil and gas industries.

Also in Brazil, Lupatech SA has continued its acquisition programme in the Merscosul region with a $30m deal to acquire Tecval Válvulas Industriais SA. Tecval is a Brazilian manufacturer of ball, check, gate and globe valves for the chemical, mining, nuclear, oil and gas, paper and petrochemical industries. The acquisition is in line with Lupatech’s strategy of broadening its range of flow control products and accessing new customers, in particular in the oil and gas and petrochemical industries. With this in mind, the group has also completed the $3m acquisition of Norpatagonica Srl, an Argentine oil and gas services company. Norpatagonica is a provider of well intervention services and is also a supplier of injection, pressure pumping and repositioning equipment.

On the private equity front, Dubai International Capital (DIC) has acquired a 45% stake in KEF Holding Ltd, a UAE-based manufacturer of steel castings for pumps and valves for the chemical, industrial equipment, mining and oil and gas industries in Asia, the Middle East, Europe and the USA. The group has two operating companies, Emirates Techno Castings and JC Middle East, which together have a production capacity of 36,000 tonnes per annum. Its customers include ENOC, KOC, Qatar Gas, Qatar Petroleum, Takreer and Tyco. DIC will build KEF into a significant competitor to European-based foundries whilst also helping it to penetrate key growth markets such as India and Saudi Arabia. In due course it plans an initial public offering for the group.

The successful conclusion of these M&A transactions will no doubt spark yet further deals in the valves industry. Valvitalia, the Italian valve manufacturer, is already on the hunt for niche control and security valve specialists in order to broaden its product portfolio. The group intends to make a number of complementary acquisitions in 2009 and could look at companies with exposure to the oil and gas industry in Canada, Central Asia and the Middle East. In December 2007 a consortium including Banca Leonardo and Synergo bought a 45% stake in the group.

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

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