Pentair plc (NYSE:PNR) agreed to buy electrical components manufacturer ERICO Global Company for $1.8 billion. This deal is mainly in cash, including ERICO’s debt.
According to a statement released on Monday August 17th, Pentair plans to fund the transaction with a combination of cash and investment grade financing, meaning that ERICO’s debt grade rating should remain at the current level. The transaction is expected to be completed in 2015 and would add more than 40 cents per share to 2016 adjusted earnings. (Source: Pentair Signs Agreement to Acquire ERICO Global Company, August 17, 2015.)
Following the news, Pentair rose only 0.59% to $62.00 a share at 10:30 a.m. in New York. The shares are down 6.58% this year.
ERICO is a leading global manufacturer and marketer of sophisticated and engineered electrical components and fastening products for electrical, mechanical, and civil applications. The company is based in Solon, Ohio and currently has 1,200 employees in 30 countries with recognized brands.
The agreement came in as part of Pentair’s expansion strategy. According to the agreement, the acquisition of ERICO is the second-largest for Pentair and its fourth this year.
“ERICO has a strong global business, and valued brands, making it a perfect fit for Pentair,” wrote Pentair Chairman and CEO Randall Hogan in a press release.
“We have similar cultures and serve similar industries with complementary products, which will create a broader and stronger offering for our end users. Importantly, this transaction reflects Pentair’s disciplined acquisition strategy and our ability to identify well-managed companies that complement our product portfolio and strengthen growing areas of our business.”
For investors, the deal is expected to help Pentair’s business by expanding its product recognition. Moreover, it would enhance Pentair’s platform with its technical solutions reporting segment. The combination is likely to help Pentair broaden its market share in the industry and generate more sales.