Rexnord Corp., the ball-bearing maker controlled by Apollo Global Management LLC, climbed the most in almost three months after hiring Goldman Sachs Group Inc. to review options including a sale.
The alternatives under study also include selling pieces of the company, whose businesses make motion-control and water-management equipment, or keeping the status quo, Milwaukee-based Rexnord said yesterday in a statement. The shares jumped 3.9 percent to $21 at the close of New York trading, the biggest jump since Nov. 19.
“Given the fact that these are high-quality businesses, I wouldn’t be surprised that there would be interest,” Mircea Dobre, a Milwaukee-based analyst at Robert W. Baird & Co., said in a telephone interview. “In my mind, you’re talking about strategic buyers probably before you’re talking about financial buyers.”
Rexnord supplies parts for Boeing Co.’s 737 narrow-body jet as well as its 747, 777 and 787 Dreamliner wide-body planes, according to the company’s website. General Electric Co. and United Technologies Corp.’s Pratt & Whitney unit use Rexnord products in their jet engines, the website said.
Apollo purchased Rexnord in 2006 and still held a 64 percent stake in the company as of Oct. 1, according to data compiled by Bloomberg. Rexnord, which went public at $18 a share, has since gained 17 percent.
Rexnord’s water-management and motion-control businesses may attract different kinds of suitors, said Dobre, who has an outperform rating on the shares.
“You can make the argument that there would be more interest for each individual business rather than for the company as a whole,” he said. “But I can certainly see how somebody that would be a diversified manufacturer would have an interest in the entire platform.”
Both the motion-control and water-management units “have attractive end markets, they have attractive margins,” he said.
A sale of both units, whether in one deal or two, is preferable, he said. Selling only the water-management business, for instance, would deprive Rexnord of the benefits from any “real upturn in some of the core markets -- commercial construction and the municipal water markets,” he said.
A deal for the entire company may be too expensive for bidders, Julian Mitchell, a New York-based analyst at Credit Suisse Group AG, wrote in a note to clients yesterday.
After the stock’s surge in after-market trading yesterday, Rexnord has a higher multiple to its 2013 earnings before interest, taxes, depreciation and amortization than where most industrial transactions have closed, including United Technologies’ sale of its Hamilton Sundstrand pump and compressor units to Carlyle Group LP and BC Partners, Mitchell wrote.
“We cannot comprehend how the sale of the entire company would attract tremendous interest at this price, especially given the share price performance” after the initial public offering, relative to operational performance, he wrote.
Mitchell has a neutral rating on Rexnord shares.
Rexnord reported fiscal third-quarter profit yesterday that trailed analysts’ estimates. Adjusted earnings per share for the period ended Dec. 29 were 19 cents a share, compared with the 20-cent average estimate compiled by Bloomberg. Sales during the period were $471.7 million, the lowest since the company’s IPO.
The industrial company forecast fourth-quarter sales of $535 million to $555 million, compared with the $555.3 million in revenue projected by analysts.