Sulzer AG (SUN) agreed to buy a waste- water pump business from Assa Abloy AB (ASSAB) for 858 million Swiss francs ($935 million) to expand in a market that it estimates will grow by more than 5 percent a year.
The Swiss engineering company will pay cash for Assa Abloy’s Cardo Flow Solution business, which generated 463 million francs in sales and 67 million francs in earnings before interest, tax, depreciation and amortization last year, Sulzer said today in a statement.
“With the intended acquisition of this strong supplier in the attractive waste-water pumps market, Sulzer will be able to benefit from the attractive long-term growth” of the industry, Chief Executive Officer Ton Buechner said in the statement.
Water and waste-water operations will account for 16 percent of Sulzer’s yearly sales after the acquisition compared with 5 percent last year, the Winterthur-based company said. The purchase will help Sulzer become one of the top three players in waste-water pumps, where ITT Corp. (ITT) holds the lead, Buechner said today on a conference call.
Demand for pumps is more stable in water-related industries than in other markets, Sulzer said. Integration savings will be quantified after completion of the deal, which is expected in the second half of this year, it said.
Assa Abloy’s Disposals
The transaction is part of Stockholm-based Assa Abloy’s disposal of parts of Cardo AB, which it acquired last year, that don’t fit its focus on building-entrance systems. Assa Abloy is the world’s largest maker of locks.
Sulzer rose as much as 6.2 percent to 152 francs, the biggest intraday jump since July 8, and was up 3.9 percent as of 1:03 p.m. in Zurich trading. Assa Abloy gained 0.6 percent to 186.3 kronor in Stockholm.
The acquisition of Cardo Flow Solutions, the largest ever by Sulzer’s industrial business, will cost the Swiss company 35 million francs over three years, including spending on integrating the unit, Buechner said on the call. Sulzer will continue to look for targets to add to existing businesses, and it can finance purchases of as much as “a couple of hundred million” francs, the CEO said.
Sulzer is paying 12.8 times Ebitda in the transaction, less than what industrial competitors paid in comparable deals, Buechner said, without specifying other purchases.
The median Ebitda multiple for acquisitions announced worldwide by manufacturing, construction and logistics companies this year is 10.06, according to Bloomberg data.
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