IMI Plc agreed to sell its beverage dispenser and merchandising businesses to Berkshire Hathaway Inc.’s Marmon Group for about $1.1 billion in cash to focus on industrial valves and fluid control systems.
IMI’s decision in March to explore options for its soda-pop dispenser, used by Coca-Cola Co., PepsiCo Inc. and McDonald’s Corp., prompted Marmon to make an unsolicited approach, it said today in a statement. Shareholders of the Birmingham, England-based IMI will receive 620 million pounds ($991 million) of the proceeds, with an additional 70 million-pound pension contribution planned.
Warren Buffett’s Berkshire will use IMI’s beverage dispensers and mixers, which are also benefiting from growing demand for chilled beers served on tap, to boost the retail and food operations of its Marmon business. IMI chief executive officer Martin Lamb, who is preparing to step down after 13 year in the role, is disposing of the business to fully focus on selling fluid technologies and control systems for chemical plants as well as the oil and gas industry.
The disposal will “enable IMI to focus on the better margins and higher growth fluid controls business,” said Glen Liddy, an analyst at JPMorgan. “We expect the improvement in group margins and higher medium-term growth prospects of the more focused business portfolio to be reflected in higher valuation multiples for the group.”
Shares of IMI, which was founded by a Scottish Victorian entrepreneur in Birmingham in 1862, gained 2.3 percent to 1,534 pence as of 10:32 a.m. in London, giving the company a market value of 4.8 billion pounds. The stock has risen 40 percent this year, while the benchmark FTSE 100 Index gained 11 percent.
“The disposal comes at the right time for IMI,” Lamb, who will retire at the end of the year, said in a phone interview. “Marmon are in this space, they are buying it to build it, rather than make cuts.”
Marmon CEO Frank Ptak said in a statement that the IMI unit will “become an integral part of the Marmon Retail Technologies company, one of three Marmon companies that together comprise approximately 160 independent manufacturing and service businesses worldwide.”
IMI was advised by JPMorgan Cazenove and Citigroup Inc., while Robert W Baird & Co. advised on the merchandising disposal process.
IMI said in a separate statement today that sales adjusted for acquisitions and currencies swings rose 3 percent in the three months to the end of September. In the beverage dispense unit, revenue declined 8 percent as major customers continued to defer investments.
IMI said earlier this year it plans to pick up its pace of acquisitions in the energy industry after buying a Canadian company that serves refineries. IMI may spend as much as 1 billion pounds on purchases over the next five years, Lamb said in August.
The company is interested primarily in the energy industry as shale gas development in the U.S. boosts opportunities for it to serve petrochemical producers. The maker of valves for the control of liquid and gas flows also plans to benefit from nuclear energy expansion in China, Russia, India and Korea.