Sulzer Soars on $289 Million Deal to Buy Mascara-Brush Makerby
Shares set for biggest gain in six years on cosmetics growth
CEO says Sulzer still committed to core pumps business deals
Sulzer AG shares surged after the Swiss industrial company agreed to buy German mascara-brush maker Geka GmbH for 260 million euros ($289 million) in a bid to expand into cosmetics supplies from its main business of pumps for oil and mining.
The acquisition from U.K. private equity firm 3i Group Plc will double the size of Sulzer’s plastic injecting molding business, its most profitable unit, the Winterthur, Switzerland-based company said in a statement on Monday. The move comes amid a downturn in commodity prices that has hurt orders for Sulzer’s equipment used for oil platforms and power stations.
“Cosmetics is highly resilient,” Chief Executive Officer Greg Poux-Guillaume said on a conference call about the deal, adding that Geka will be “a little bit of a balancing factor in the world of commodity volatility.” The shares rose as much as 9.2 percent, putting them on track for the biggest rise in more than six years.
Sulzer’s diversification from the cyclical energy and mining industries is the first strategic shift for the CEO, who took the helm in December as part of a slew of management changes in Russian billionaire Viktor Vekselberg’s Swiss industrial holdings. Vekselberg’s Renova Group has a 63 percent stake in Sulzer, according to data compiled by Bloomberg.
The addition of Geka will make Sulzer Mixpac Systems, as the plastic injecting molding business is known, “the most profitable and resilient business in Sulzer,” Poux-Guillaume said on the call. The company’s pump business has been hurt by a steep decline in demand from the oil and gas industry, with total orders falling by 13.1 percent in the first quarter.
The purchase of Geka is positive because it not only reduces dependency on oil and gas, but is also a good fit with Mixpac, Vontobel analyst Fabian Haeckl said in a note.
Shares were trading 9.2 percent higher to 92.75 Swiss francs at 1:16 p.m. in Zurich, valuing the company at 3.2 billion francs ($3.3 billion).
Geka is expected to post full-year revenue of about 150 million euros and earnings before interest, taxes, depreciation and amortization of around 27 million euros, Sulzer said in the statement.
The purchase follows Sulzer’s acquisition earlier this year of U.K.-based PC Cox, which added some 20 million Swiss francs in revenue to the SMS unit. Sulzer’s M&A department is now more focused on the company’s core pumps business, Poux-Guillaume said, and the latest purchase won’t stop Sulzer from making further deals.
“It’s not that we’ve lost our taste for pumps and service,” he said. “We are interested in small to medium-sized targets and we have ongoing discussions.”