Colfax Completes Divestment Of Fluid Handling Unit To CIRCOR

Machinery company Colfax Corporation (NYSE:CFX) announced yesterday that it has completed the sale of its Fluid Handling business to CIRCOR International, Inc for approximately $863 million. The deal was announced on Sep 27.

The company’s Fluid Handling business offered products like pumps, fluid handling systems and controls, and specialty valves. Prime brands include Allweiler and Imo. The results of this business were grouped under the company’s Gas and Fluid Handling segment (now renamed to Air and Gas Handling). In the 12 months ended Jun 30, 2017, the divested assets generated revenues of $463 million and earnings before interest, tax, depreciation and amortization of $64 million.

Divestment Details

As noted, the divestment proceeds of $863 million included cash component of $542 million and assumption of certain net pension liability. In addition, CIRCOR issued approximately 3.3 million of its common shares to Colfax. The stocks, valued at closing price of trading on Dec 8, would represent roughly 16% of CIRCOR’s issued and outstanding shares.

The company anticipates recording a material gain related with the divestiture in the fourth quarter of 2017.

Inorganic Expansion Fuels Growth

We believe that such dispositions are in sync with Colfax’s inorganic ways of strengthening its core businesses. The company aims to enhance its ESAB and Howden businesses through meaningful acquisitions. Building new business platforms is also a priority.

Notably, in second-quarter 2017, Colfax acquired TBi, a leader in robotic torch technology, and HKS, a developer of advanced process analytics and sensors. These buyouts have strengthened the company’s welding process analytics and robotic welding torches operations in the Fabrication Technology segment. Also, in October, it completed acquiring Siemens AG’s Siemens Turbomachinery Equipment GmbH business. This strategic acquisition will solidify Colfax’s Howden trading platform.

In the first nine months of 2017, Colfax’s acquired assets contributed roughly 1.3% to year-over-year sales growth.

Zacks Rank & Stocks to Consider

Colfax currently has a $4.5 billion market capitalization and carries a Zacks Rank #3 (Hold). Despite the positive aspects, we believe that company’s exposure to headwinds from uncertain global economic conditions, unfavorable forex movements and stiff competition might be concerns. In the last three months, Colfax’s shares have declined 11.8%, underperforming 9.4% gain recorded by the industry it belongs to.

Also, over the last 60 days, the stock’s Zacks Consensus Estimate of $1.71 for 2017 has increased 1.2% from its tally 60 days ago while that of $1.77 for 2018 has decreased 7.8%.

Colfax Corporation Price and Consensus


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