SKF To Acquire US-based Kaydon For About $1.25 Bln

(RTTNews) - Swedish ball-bearing maker SKF Group (SKFRY.PK, SKFB.L) Thursday said it has agreed to acquire US-based industrial manufacturer Kaydon Corp. (KDN) in an all-cash transaction valued at around $1.25 billion, including $95 million of net debt. SKF noted that the deal will be accretive to its earnings in year one.

As per the terms of the definitive agreement, which has been unanimously approved by the board's of both the companies, SKF will commence a tender offer to purchase all of Kaydon's outstanding shares for $35.50 per share in cash.

The transaction represents a premium of 22 percent to Kaydon's closing stock price on September 4, 2013, a 21 percent premium to the 30-day volume weighted average price and a multiple of 12.7 times Kaydon's LTM adjusted EBITDA, which totaled $98 million as of June 29, 2013.

The tender offer will commence on September 16, and is subject to customary terms and conditions, regulatory clearances, including the tender of at least a majority of the outstanding shares of Kaydon common stock.

Upon completion of the tender offer, SKF will acquire all remaining shares through a short form merger. The deal is expected to close sometime in the fourth quarter of 2013, the firm said.

Kaydon, which makes customized engineering products, has three distinct business areas: friction control products (bearings), velocity control products and specialty products, including environmental services.

According to SKF, the acquisition shows the company's strong commitment to the North American market, and will also enable to better serve its customers and distributors in the industrial market worldwide. Kaydon has a global footprint, with 62 percent of its sales generated in North America.

SKF expects to achieve significant synergies over the next several years with annual cost synergies of $30 million and $50 million in sales synergies.

In 2012, Kaydon generated sales of $475 million, with an adjusted operating profit of around 16 percent and has over 2,100 employees.

SKF noted that the addition of Kaydon would have given a proforma sales increase for the full year 2012 to around 67.7 billion Swedish kronor from 64.6 billion kronor and with an adjusted operating profit to nearly 7.8 billion kronor, up from 7.3 billion kronor.

James O'Leary, chairman and chief executive officer of Kaydon stated that the company's board believes that the proposed transaction represents a compelling value for its shareholders.

SKF said it intends to fund the transaction through existing cash and credit lines.

J.P. Morgan is serving as exclusive financial advisor to SKF and Reed Smith is providing legal counsel. In Stockholm, SKF shares are currently trading at 181.4 kronor, up 0.78 percent. KDN ended on Wednesday at $29.10 on the NYSE.