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Flowserve Corp. reached a definitive agreement to acquire the Flow Control Division (IFC) of Invensys plc for $535 million, under specified contractual terms.
Closing of the transaction is expected within 60 days, assuming regulatory approvals, lender consent, completion of transaction financing and satisfaction of customary contractual closing conditions.
IFC is a manufacturer of valves, actuators and associated flow control products. For the 12 months ending March 31, 2002, IFC expects to generate revenues of approximately $520 million and earnings before interest, taxes, depreciation and amortization (EBITDA), before restructuring expenses, of approximately $87 million.
"Integrating IFC into Flowserve's Flow Control Division should yield meaningful hard synergies, particularly in manufacturing operations, potentially generating annual cost savings in the area of $1015 million," said C. Scott Greer, Flowserve chairman, president and chief executive officer. "Due to timing, these projected synergies will not have a significant impact on 2002 results. The consolidation necessary to yield these projected savings, at an expected cost of three-times projected synergies, should be complete within about a year of closing."
The transaction is expected to be financed through a combination of debt and equity, following the company's objective of having no higher overall leverage after closing than the current level, as measured by the ratio of total debt to EBITDA.
"Based on our current financing plan and IFC's performance outlook, the acquisition of IFC should be neutral to slightly accretive to Flowserve's 2002 earnings, absent one-time charges, even without these potential synergies. In addition, this transaction should not have a significant impact on our leverage ratio under these parameters," Greer said.
"The addition of IFC will bolster our position among the world's elite valve manufacturers and will propel us into the position of second largest valve producer in the world. IFC brings a dozen well-recognized brands that will broaden Flowserve's offering of high quality valve products and related services. These brands significantly deepen our offerings and applications to a diverse end-user marketplace. Now that we have completed the integration of IDP, the acquisition of IFC is the next step in our strategy to be a leading consolidator in the flow control industry," Greer said.