Parker-Hannifin to acquire Exotic Metals for $1.725B in cash
Parker Hannifin Corporation (PH) announced that it has entered into a definitive agreement to acquire Exotic Metals Forming Company LLC for $1.725B in cash. When adjusted for approximately $170M of expected tax benefits, the net transaction value is approximately $1.56B.
The transaction has been approved by the Board of Directors of each company and is subject to customary closing conditions, including receipt of applicable regulatory approvals.
Exotic Metals, headquartered in Kent, Washington, is a privately held company founded in 1966 that designs and manufactures innovative and technically demanding, high temperature, high pressure air and exhaust management solutions for aircraft and engines.
Exotic Metals has expected annual sales of approximately $450M and employs 1,600 team members across three locations in the United States.
Exotic Metals has long-term agreements in place across high growth aerospace programs.
Parker also expects growth synergies through cross-selling opportunities and leveraging Parker’s strong aftermarket position.
Parker expects to realize approximately $13M in pre-tax run-rate synergies by fiscal year 2023 by combining supplier networks and implementing Win Strategy initiatives. The cumulative cost to achieve these synergies is expected to be approximately $5M.
The transaction is expected to be accretive to Parker’s organic growth, EBITDA margins, EPS and cash flow, after adjusting for one-time costs, and to achieve high single-digit ROIC in year five with continued expansion.
Upon the closing of this transaction, Parker plans to have Exotic Metals operate as a standalone division within Parker’s Aerospace Group, which is led by Roger Sherrard, Vice President and President Aerospace Group.
Parker plans to finance the transaction using new debt.
Following the completion of the transaction, Parker expects to maintain a high investment grade credit profile.
The transaction is not expected to impact Parker’s dividend payout target of approximately 30-35% average percent of net income over a five-year period, while maintaining its record of annual dividend increases.
The transaction is expected to be completed within the next two to three months and is subject to customary closing conditions, including receipt of applicable regulatory approvals.
PH last traded at $172.46, down $2.45.
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