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SKF Scouts for Deals Among Makers of Seals, Power Systems

Oct. 25 (Bloomberg) -- SKF AB, the world’s largest maker of bearings, may use acquisitions to expand its offerings of industrial seals and power-transmissions systems, Chief Executive Officer Tom Johnstone said.

“We’re on the lookout to see what we can do,” Johnstone said in an interview at Bloomberg’s headquarters in New York. “In the seals area, there’s still work to do. We’ve also been looking for some time at power transmission, and there are things we could do in that area that are very complementary.”

Johnstone, 58, said he is deferring major purchases for at least the next few quarters as SKF integrates last week’s $1.25 billion takeover of Kaydon Corp., the largest in the Gothenburg, Sweden-based manufacturer’s 106-year history. “Bolt-on” acquisitions are possible in the meantime, he said.

SKF is moving production to faster-growing markets, such as Asia and Latin America, from western Europe. The company has said it wants to expand in North America because industrial growth and modest wage increases make the region more attractive for major investments this year than China.

About 6.7 percent of SKF’s assets, including factories and production facilities, are based in Sweden, compared with 28 percent in North America and 41 percent in the rest of Europe, based on data compiled by Bloomberg. SKF employs 46,000 people.

While Kaydon is based in Ann Arbor, Michigan, future acquisition targets won’t be limited to the U.S., Johnstone said.

“The geographical location of the company or the headquarters is not the determinative factor,” Johnstone said. “Does it bring us the right technology? Does it support the customers and end-markets we’re trying to serve?”

SKF today dropped 0.5 percent to 172.9 krona in Stockholm trading, paring the shares’ year-to-date advance to 3.2 percent. That trailed the 17 percent gain for Sweden’s benchmark OMX Stockholm 30 index.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Simon Thiel at sthiel1@bloomberg.net

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