Less than two weeks into being a public entity, Neles has become the subject of a friendly takeover offer from Alfa Laval AB.
The two have entered into a combination agreement pursuant to which Alfa Laval will make a voluntary recommended public cash tender offer for all issued and outstanding shares in Neles that are not held by Neles or any of its subsidiaries, the two companies said.
The €11.50/share ($13/share) all-cash bid values Neles at around €1.7 billion, which is a 32.8% premium to the closing Neles share price on July 10.
Alfa Laval, a leading global provider of products and solutions based on its key technologies of heat transfer, separation and fluid handling, has identified the industrial flow control market as a key growth area, it said. The planned transaction enables it to considerably strengthen its presence in the large industrial flow control space where the company currently offers mainly energy efficiency solutions, they said.
“On the other hand, Alfa Laval believes there are several areas where being part of the Alfa Laval Group can make a significant contribution to the future development of Neles, such as leveraging Alfa Laval’s existing global platform,” it said.
Some of Alfa Laval’s products are used in the engineering sector, mining industry and refinery sector, treating wastewater and in creating a comfortable indoor climate.
Neles, which began trading on the Helsinki Stock Exchange on July 1 as part of Metso’s partial demerger and merger with Outotec, is a global leader in flow control solutions and services. The company’s valves and valve automation technologies are known for quality, reliability and highest safety, it says.
The members of the Board of Directors of Neles who participated in the decision-making process have unanimously decided to recommend the shareholders of Neles accept the tender offer, while Cevian Capital, which holds some 10.9% of the issued and outstanding shares in Neles, has on customary conditions irrevocably undertaken to accept the offer.
Alfa Laval will on or about August 13, 2020, publish a tender offer document with detailed information about the tender offer and information on how to accept it. The offer period is expected to commence on or about this date and to expire on or about October 22, 2020, unless the offer period is extended by Alfa Laval.
“Neles and Alfa Laval would create a larger and stronger global player in the flow control market,” they said. “As a combined company, Neles would become an integral part of Alfa Laval’s organisation structure while largely retaining its operational structure and strong identity within the Alfa Laval network.”
The combined company’s combined revenue for the 12 months ended March 31, 2020, was approximately SEK53.8 billion ($5.9 billion) and it had a combined total of some 20,300 employees globally on March 31, 2020.
“The transaction is expected to be earnings per share accretive for Alfa Laval beginning from the first year following the completion of the tender offer,” they said.
There are several areas where being part of the Alfa Laval Group can make a significant contribution to the future development of Neles, Alfa Laval says, with certain strategic opportunities including:
- Leveraging Alfa Laval’s service network infrastructure of around 100 service centres globally;
- Leveraging Alfa Laval’s automated warehouse presence in North America, Europe, and Asia in Neles’ global parts distribution. The set-up is well suited to Neles’ product range and can provide a world-class solution in the industrial flow market, it says; and
- Acquisition growth: Alfa Laval has a long history of successful M&A transactions and the financial strength to support a meaningful acquisition program in the industrial flow market.
Commenting on the offer, Tom Erixon, President and CEO of Alfa Laval, said: “The proposed deal offers a strong industrial logic: our businesses complement each other well with very little overlapping operations. Alfa Laval has the resources to invest in and support the development of Neles for years to come, while our global service network offers Neles a ‘plug and play’-kind of platform. As an owner, Alfa Laval would be committed to the strategy and industrial plan of Neles while offering a powerful platform to enable future growth. The match is nearly perfect.”
Olli Isotalo, President and CEO of Neles, said: “We see this offer as clear evidence of the good, strong work done throughout the years. It means that Alfa Laval believes in and appreciates our strategy, products and, most of all, know-how of our people. We continue to be serving our customers and executing our strategy and are delighted to hear that Alfa Laval would support our endeavours.”