Gardner Denver, Private-Equity Firms Said to Renew Talks

Gardner Denver Inc., the industrial equipment maker seeking a buyer, attracted renewed interest from suitors KKR & Co. and Advent International Corp. after talks with SPX Corp. ended, said people familiar with the matter.

Meetings will begin next week with Advent and KKR, as well as a team formed by Onex Corp. and TPG Capital, said the people, who asked not to be named as the process is private. The company, which has a market value of more than $3.3 billion, canceled talks with the firms last month to work on a deal with fellow equipment maker SPX, a person with knowledge of the matter said then.

“I would actually be surprised if something wasn’t announced within the next month,” Joshua Pokrzywinski, an analyst with MKM Partners LLC, said yesterday. “It’s a distraction for the employees and ends up being an actual headwind to the core business. If they can get this buttoned up, all the better for the company.”

The earlier agreement collapsed in part because SPX couldn’t get the terms it wanted on a loan, people familiar with the process said last month. SPX had offered about $85 a share, and private-equity firms may not be willing to pay as much for Wayne, Pennsylvania-based Gardner Denver, said two people. The earlier private-equity bids had come in around $73 to $75 per share, said two of the people.

‘Highly Likely’

“Ultimately a deal is highly likely here,” said Pokrzywinski, who is based in Stamford, Connecticut, and has a neutral or hold rating on the stock. “Gardner Denver would be amenable to something at or slightly above $75. That would get it done.”

The shares fell 0.5 percent to $68.34 at the close in New York yesterday after having advanced as much as 5.4 percent earlier in the day when Bloomberg News first reported the renewed talks.

Gardner Denver makes compressors, pumps and other products for industries including manufacturing and energy exploration. Its fourth-quarter results may help to determine bid prices, said one of the people.

Vikram Kini, a spokesman for the company, didn’t return calls yesterday seeking comment on the talks. Representatives for TPG and KKR declined to comment. Officials at Boston-based Advent and Onex didn’t return calls seeking comment.

Gardner Denver sank 11 percent in New York on Dec. 21, when reports surfaced that the SPX deal collapsed. Gardner Denver said then that it would continue to work with its adviser, Goldman Sachs Group Inc., to pursue options including a sale. Michael DuVally, a spokesman for New York-based Goldman Sachs, didn’t immediately return a call seeking comment.

Earnings Potential

Gardner Denver began working with Goldman Sachs on strategies after activist investor ValueAct Capital Management LLC began lobbying for a sale in July, people familiar with the matter had said. ValueAct owned about 5.1 percent of Gardner Denver as of Sept. 30, according to data compiled by Bloomberg.

Private-equity firms are attracted to Gardner Denver because of earnings potential at its compressor business, which is one of the world’s largest alongside the units of Ingersoll-Rand Plc and Stockholm-based Atlas Copco AB, Pokrzywinski said. Profit margins at the compressor unit, which trail its competitors, could rise as much as 600 basis points over the next five years, he said.

“The private-equity guys would look at that as a margin opportunity,” he said.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE