CIRCOR to Acquire Colfax’s Fluid Handling Business from Colfax Corporation for $855 Million in Cash and Stock
Acquisition of Leader in Differentiated Pump Technology Enhances Ability to Deliver Complete Flow Control Solutions
Expected to be Accretive to Earnings and Margins within the First Year
Company to Hold Conference Call at
Under the terms of the agreement,
CFH is a world leader in the engineering, development‚ manufacturing‚ distribution‚ service and support of fluid handling systems. With a history dating back to 1860‚ CFH is the leading supplier of screw pumps for high demand, severe service applications across a range of markets including general industry, commercial marine, defense, and oil & gas. CFH leverages differentiated technology, and provides critical aftermarket customer support, to maintain leading positions in high demand niche markets.
“CFH’s differentiated product offering enhances our ability to provide
critical flow control solutions, and expands our presence into new
markets,” said
Compelling Strategic Benefits
- Complementary and Differentiated Portfolio. CFH’s differentiated product portfolio, recognized brands, and large installed base enhance CIRCOR’s ability to deliver more comprehensive flow control solutions into existing and new end markets.
- Diversified End Markets. The combination enhances CIRCOR’s position in the industrial, defense, and oil & gas end markets while expanding CIRCOR’s reach into commercial marine.
- Significant Aftermarket Exposure. CFH’s extensive installed base and related aftermarket business provide a complementary source of growth and margin expansion.
-
Increased Scale. On a pro forma basis, the combined company had
approximately
$1.1 billion in revenue based on the trailing 12 months endedJune 2017 . The combination provides a more diverse product portfolio serving a broader range of end markets.CIRCOR expects to capture additional revenue opportunities over time as it realizes the benefits of cross selling.
Robust Financial Drivers
-
Defined Operating Synergies.
CIRCOR expects to realize cost synergies of$23 million by the fourth year following the transaction close, primarily driven by improved supply chain efficiency, SG&A cost reductions, and manufacturing rationalization. The company expects to incur approximately$10 million in one-time costs to achieve these synergies. - Accretive Financial Impact. The acquisition is expected to be accretive to CIRCOR’s cash EPS and adjusted operating margins in the first year following close, with additional margin expansion and long-term EPS growth going forward as synergies are realized.
-
Compelling Valuation. The purchase price represents a multiple
of 8.3X adjusted EBITDA for the trailing twelve months ended
June 30, 2017 , including the benefit of synergies and the net present value of acquired and pension tax benefits. Excluding synergies and tax benefits, the purchase price represents a multiple of 12.3X adjusted EBITDA. - Strong Return Profile. The transaction is expected to generate a return on invested capital that exceeds CIRCOR’s cost of capital by year four.
Additional Transaction Details
CIRCOR’s Board of Directors
has unanimously approved the transaction, which is subject to regulatory
approvals and other customary closing conditions, and is expected to
close by the end of 2017. Following the close of the transaction, the
CFH portfolio of brands will remain in place and the majority of the
business will operate as a separate segment within
Upon closing,
Third Quarter 2017 Guidance
In connection with today’s
transaction announcement,
Conference Call
Safe Harbor Statement
This press release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements may often be
identified by the use of words such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,”
“should,” “will,” “potential,” and similar terms and expressions.
Reliance should not be placed on forward-looking statements because they
involve unknown risks, uncertainties and other factors, which are, in
some cases, beyond the control of
Use of Non-GAAP Financial Measures
Adjusted operating
income, Adjusted operating margin, Adjusted net income, Adjusted
earnings per share (diluted), EBITDA, Adjusted EBITDA, Adjusted EBITDA
margin, pro forma combined figures, net debt, net leverage and free cash
flow are non-GAAP financial measures. These non-GAAP financial measures
are used by management in our financial and operating decision making
because we believe they better reflect our ongoing business and allow
for meaningful period-to-period comparisons. We believe these non-GAAP
financial measures provide useful information to investors and others in
understanding and evaluating the Company’s current operating performance
and future prospects in the same manner as management does, if they so
choose. These non-GAAP financial measures also allow investors and
others to compare the Company’s current financial results with the
Company’s past financial results in a consistent manner. For example:
- We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.
- We exclude certain acquisition-related costs, including significant transaction costs and amortization of inventory step-ups and the related tax effects. We exclude these costs because we do not believe they are indicative of our normal operating costs.
- We exclude the expense and tax effects associated with the non-cash amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of 5 to 20 years. Exclusion of the non-cash amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.
- We also exclude certain gains/losses and related tax effects, which are either isolated or cannot be expected to occur again with any predictability, and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business, significant litigation-related matters and lump-sum pension plan settlements.
CIRCOR’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the Company’s operating performance and comparing such performance to that of prior periods and to the performance of our competitors. We use such measures when publicly providing our business outlook, assessing future earnings potential, evaluating potential acquisitions and dispositions and in our financial and operating decision-making process, including for compensation purposes.
Investors should recognize that these non-GAAP measures might not be
comparable to similarly titled measures of other companies. These
measures should be considered in addition and not as a substitute for or
superior to, any measure of performance, cash flow or liquidity prepared
in accordance with accounting principles generally accepted in
About
View source version on businesswire.com: http://www.businesswire.com/news/home/20170925005606/en/
Source:
CIRCOR International, Inc.
Rajeev Bhalla, 781-270-1210
Executive
Vice President and Chief Financial Officer