UK's Pentair to buy US engineering products maker Erico for $1.8 bn
18 August 2015
UK's diverse industrial products maker Pentair Plc is buying US-based manufacturer of engineered electrical and fastening products Erico Global Co for approximately $1.8 billion in cash including debt, aiming to expand its product offerings globally.
Ohio-based Erico, founded in 2002, is a leading global manufacturer of engineered electrical and fastening products for electrical, mechanical and civil applications. The company has over 1,200 employees in 30 countries.
Its products are sold under brands 'Caddy' fixing and fastening products, 'Erico' electrical grounding and bonding products and 'Lenton' engineered systems.
Pentair's chairman and CEO Randall Hogan said in statement, ''The addition of Erico's complementary business will expand our presence in the commercial and industrial sectors. Erico has a strong global business and valued brands, making it a perfect fit for Pentair.''
''The combination will result in tremendous global opportunities to expand sales and better serve the companies' shared industries," Erico's chairman Bill Roj said.
Erico will benefit from Pentair's ''advantaged capital structure,'' he said.
Manchester-based Pentair's businesses include flow technologies, technical solutions, process technologies and valves and controls. They provide water pumps, automation and control systems, filtration products, valves, actuators and controls.
In 2014, the company's revenue was $7 billion and net profit was $215 million.
The transaction values Erico at about 12 times its 2015 earnings before interest, tax, depreciation and ammortisation.
For Pentair, in which New York-based activist investor Trian Fund Management LLP holds over 7-per cent stake, the deal is the biggest since its $4.6-billion merger with Tyco International Plc's pump and valve business in 2012.
In an interview with The Wall Street Journal yesterday Hogan said the addition of Erico's engineered electrical and fastening products will reduce the company's exposure to oil-price volatility, which has affected the performance of the company's valve and control business.
The deal is expected to close in 2015 subject to customary closing conditions and regulatory approvals.
On completion, Erico will become part of Pentair's Technical Solutions unit.
According to some analysts, Pentair has an edge over some of its US rivals because of its incorporation in Ireland and operations in Ireland and the UK, where corporate tax is lower.
The transaction is expected to be accretive to Pentair's adjusted earnings per share of over 40 cents for 2016.
Further to the news, shares in Pentair went up 1.5 per cent to close at $62.60 yesterday in New York.
Goldman Sachs & Co is serving as financial advisor to Pentair, while Erico is advised by JP Morgan in this transaction.