GEA Group AG (G1A) agreed to sell its heat-exchangers unit to private-equity firm Triton Advisers Ltd. at an enterprise value of 1.3 billion euros ($1.8 billion) and will use the proceeds for purchases as it focuses on food-processing equipment.
The agreement was signed today, and the transaction is subject to antitrust approvals, Dusseldorf, Germany-based GEA said in a statement. GEA shares surged the most in five years.
GEA, founded in 1881 as a metals-trading company and now a manufacturer of milking machines and beer-brewing kits, had a decline in orders in Europe and the Americas last year. The heat-exchangers division, which reported 2013 earnings before interest, taxes, depreciation and amortization of 161 million euros on sales of 1.5 billion euros, sells applications for air conditioning and chemical plants.
“As an investor Triton will allow heat exchangers to develop to its best business potential,” GEA Chief Executive Officer Juerg Oleas said in the statement. The sale is “an important milestone” that will allow GEA to “further focus on the food and beverage industries.”
GEA’s first-quarter revenue rose 2.9 percent to 951 million euros, the company said in a separate statement today. Orders declined 6.5 percent to 1.02 billion euros, caused entirely by a decline in large orders in the Process Engineering segment, and exacerbated by a 4 percent negative currency impact.
The shares jumped as much as 9.2 percent, the most since May 2009, and were up 7.1 percent at 32.38 euros as of 10:22 a.m. in Frankfurt. That pared losses this year to 6.4 percent, valuing the company at 6.2 billion euros.
GEA expects the sale, which includes debt at the unit, to be completed by the end of December, and anticipates a “small” accounting profit, spokesman Axel Wolferts said by telephone. GEA declined to say how much debt Triton will assume in the purchase. GEA units held for sale had debt of 620 million euros at the end of 2013.
Food processing technology will represent more than 70 percent of GEA’s revenue after the sale, the company said.
“Potential target areas are to be seen in emerging markets where GEA is not yet very strong or in processing equipment for animal protein where GEA is only No. 3 or 4 in the market,” Frankfurt-based Equinet analyst Holger Schmidt said in a note to clients.
The disposal value is probably about 1 billion euros once about 300 million euros of debt is taken into account, said Schmidt, who cut his recommendation on the stock to hold from “accumulate.”
That business, which makes air preheaters and gas-gas heaters for thermal power plants as well as heat transfer technology for petrochemical and industrial processes, generated 430 million euros in revenue and a “double-digit” operating margin in the most recent fiscal year.
Triton raised about 3.5 billion euros for its fourth pool of capital, Triton Fund IV LP, in 2013.
The companies in Triton’s portfolio, which range from German fertilizer-maker Compo to Danish chemical tanker operator Nordic Tankers, have combined sales of about 13 billion euros and more than 55,000 employees, according to the company’s website.