Mergers & Acquisitions in the Global Valves Industry – May 2008

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The momentum in M&A transactions in the valves industry continues with no noticeable impact from tightening credit conditions. Indeed, the sector could well prove to be a safe haven for investors as they avoid other trouble-hit industries. The past few months has seen positive messages coming from both financial and trade buyers about the ongoing attractions of the sector.

Whilst many transactions this year will see banks syndicating their debt packages in order to reduce their risk profiles, this feature will primarily be restricted to larger deals. The key is that there remains a robust demand for new acquisition and investment opportunities. This is a testament to the high quality of businesses and management expertise in the valves industry and we should remain confident hoped that this resilience is maintained throughout the remainder of 2008 and beyond.

A deal which is symbolic of this confidence involves Z&J Technologies GmbH, a German manufacturer of heavy-duty valves for the chemical, energy, glass, iron, petrochemical, refining and steel manufacturing industries. Z&J has been acquired in a secondary private equity transaction by Italian Lifestyle Partners for $138m.

Z&J was formed in 2002 through the merger of Zimmermann & Jansen GmbH and Hermann Rappold GmbH. In 2007 it had annual revenues of around €80m and over 400 employees. The company has been sold by Equita Management, a German private equity firm, which originally invested in Z&J in 2006. Debt funding for the deal was provided by Commerzbank.

A clear sign that mergers and acquisitions in the valves industry are high on the agenda of the major multinational players is that trans-Atlantic deals are still taking place. Dover Corp, the US diversified manufacturer of industrial products, has seen its Cook Compression division acquire Compressor Valve Engineering Ltd (CVE), a UK manufacturer of a wide range of compressor valves and replacement parts for air, marine, process gas, railway and refrigeration compressors.

The acquisition of CVE represents a strategic expansion of Cook Compression’s product offering and allows it to provide valve solutions for any compressor in any application. It was particularly attracted to CVE’s products for challenging process applications and its relationships with OEMs, service providers and end-users worldwide. CVE also provides valve reconditioning services and metal-to-plastic plate conversions. The deal value was undisclosed.

At the same time, Cook Compression has acquired Hyper Products and Services Inc, a US manufacturer of reciprocating equipment, for an undisclosed sum. Hyper Products’ portfolio includes equipment for the repair and manufacturing of heavy-duty compressor and natural gas engine components, as well as a database of drawings and specifications for compression equipment. This acquisition again reinforces Cook Compression’s strategy of becoming a single-source supplier of reciprocating components for compressors and engine operators. In November 2007, it acquired Windrock Inc, a US manufacturer of monitoring and diagnostic equipment for reciprocating machinery in the marine, oil and gas, petrochemical and power generation industries.

Peak Well Solutions AS, a Norwegian manufacturer of subsea products, has been acquired by Seawell Ltd, a Norwegian provider of offshore engineering services and related products. The deal value for the transaction was $78m. Peak will expand Seawell’s range of unique cementing valves and well barrier products as part of its strategy of enhancing its portfolio of specialist drilling and well products and services for the oil and gas industry. Seawell is 80% owned by Seadrill AS, the Norwegian offshore drilling contractor.

Smith-Cooper International LLC (SCI) has acquired Fine Stainless Piping Products Inc, a US manufacturer of fittings, flanges, pipes and valves for the chemical, oil and gas, petrochemical and process industries. The deal value was undisclosed. Fine Stainless Piping Products was originally founded in 1999 as a master distributor of stainless steel products, before moving into the manufacturing of proprietary fittings. The transaction will reinforce Smith-Cooper’s operations on the US West coast. It will also complement the major East coast presence of Smith-Cooper’s Sharpe Valves division in order to create a group which is now a nationwide supplier of brass, iron and stainless steel fittings, industrial pipe and valves.

PSV Holdings Ltd, a South African manufacturer of pumps and valves, has acquired APE Pumps Ltd, a South African manufacturer of flow control and pump equipment for the mining, petrochemical, power generation, pulp and paper, shipping and water industries, for an undisclosed sum. The acquisition brings an original equipment manufacturer into PSV’s stable of engineering companies. The deal will also facilitate the expansion of the group’s wider engineering capabilities as PSV plans to consolidate its pump and valve manufacturing operations into APE’s plant in Wadeville. The facility will undergo re-organisation and expansion in order to increase its capacity and bring some outsourced manufacturing back in-house.

Other developments which will be taking shape of the coming months are the counter-offer for Koninklijke Econosto NV from ERIKS Group NV, the Dutch supplier of highly-engineered components and technical products. Econosto had earlier this year agreed a $200m deal with Gilde Buy-Out Partners, a Dutch private equity firm. Econosto is a manufacturer and distributor of couplings, energy systems, gaskets, hoses, HVAC components, instrumentation, sealing products and valves.

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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