KKR & Co. (KKR:US), the private-equity firm run by Henry Kravis and George Roberts, agreed to buy industrial equipment maker Gardner Denver Inc. (GDI:US) for about $3.7 billion after raising its offer.
KKR will pay $76 a share for Wayne, Pennsylvania-based Gardner Denver, the companies said today in a statement. That’s a 39 percent premium to the price on Oct. 24, the day before the company announced it was exploring a sale. KKR last month offered $75 a share, Bloomberg News reported Feb. 21.
“The long-term future of Gardner Denver is bright,” Pete Stavros, head of KKR’s industrials team, said in the statement. The deal, expected to close in the third quarter, is valued at $3.9 billion including the assumption of Gardner Denver’s debt.
Gardner Denver said in October it was reviewing options including a sale after ValueAct Holdings LP, which disclosed in July that it had become the third-largest investor, pressed for a deal as “the most effective way to deliver maximum value to shareholders.” The sale to KKR comes after rival SPX Corp. (SPW:US) and private-equity firms Advent International Corp. and the team of Onex Corp. (OCX) and TPG Capital walked away from takeover discussions, people familiar with the matter have said.
Gardner Denver rose (GDI:US) 1.2 percent to $74.74 at the close of trading in New York. The company makes compressors, pumps and other products for industries including manufacturing and energy exploration. Other suitors for the company included private- equity firms CCMP Capital Advisors LLC, Bain Capital LLC and Blackstone Group LP. (BX:US)
KKR climbed 1.2 percent to $19.03. The stock has gained 25 percent this year, outpacing the 8.8 percent increase in the Standard & Poor’s 500 Index of large U.S. companies.
The deal is subject to several provisions, including approval by China’s commerce ministry, South Africa’s competition commission and U.S. and European antitrust regulators, according to a Gardner Denver filing (GDI:US) with the U.S. Securities and Exchange Commission today. The company would be required to pay KKR a fee of $103.4 million if it terminates the agreement, and KKR would have to pay Gardner Denver $263.1 million if the private-equity firm fails to complete the deal, according to the filing.
The pump maker’s market has faced an influx of competitors amid a historic boom in natural gas production, and Gardner Denver has since focused on boosting margins through measures such as restructuring its European operations. The manufacturer estimated the cost cuts will result in annualized pretax savings of $35 million to $40 million by 2016.
“Industrial markets are awash with cash, putting private- equity firms and activist investors in a strong position,” Julian Mitchell, a New York-based analyst at Credit Suisse Group AG, said today in a note to clients.
Shares of Gardner Denver peaked at $91.50 on July 22, 2011. ValueAct held a 5.1 percent stake (GDI:US) in the company as of Feb. 22, according to data compiled by Bloomberg.
Today’s deal brings the value of private-equity investments in industrial companies to $9.2 billion so far this year, more than double the $4.1 billion of such transactions in the same period last year, according to data compiled by Bloomberg.
KKR, founded in 1976, oversaw $75.5 billion of assets as of Dec. 31. The firm’s industrials team last year closed a $1.1 billion deal for Capital Safety Ltd., the maker of harnesses and lanyards that protect workers from falls.
Goldman Sachs Group Inc. (GS:US) acted as a financial adviser to Gardner Denver, with Skadden Arps Slate Meagher & Flom providing legal counsel. UBS AG and Simmons & Co. International gave financial advice to KKR, and Simpson Thacher & Bartlett LLP provided legal guidance.
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