CECO Environmental Corp. (CECE - Snapshot Report) recently announced that it expects to close the proposed merger with Met-Pro Corporation between Aug 27 and 29. However, the closure will depend upon approvals by Met-Pro's and CECO's respective shareholders. The intention to acquire Met-Pro was previously announced on Apr 21, 2013.
Following the merger, Met-Pro will become a wholly-owned subsidiary of CECO. Met-Pro is a niche-oriented global provider of product recovery, pollution control, fluid handling and filtration solutions across multiple diversified end-markets.
According to the terms of the agreement, CECO will purchase all the outstanding shares of Met-Pro’s common stock in cash and stock transaction. The total value of the deal is approximately $210 million, or $13.75 per share, reflecting a 43% premium to Met-Pro's share price as of Apr 19, 2013 (the closing date prior to the merger announcement).
In addition, the purchase includes $7.25 per share in cash and $6.50 per share in CECO common stock. Further, according to the terms of the agreement, Met-Pro's shareholders may opt to exchange each share of Met-Pro common stock for either $13.75 in cash and/or shares of CECO common stock having an equivalent value based on the volume weighted average trading price of CECO common stock for the 15-trading day period ending on the date immediately preceding the closing of the acquisition, subject to a collar. Overall elections are subject to proration so that roughly 53% of Met-Pro shares will be exchanged for cash and 47% for stock.
Met-Pro’s shareholders will be holding a meeting on Aug 24, 2013 to decide and specify the type of consideration they wish to receive in the proposed merger. Further, if the transaction is closed as expected before Aug 30, 2013, then Met-Pro’s quarterly dividend that was declared on Jun 5, 2013 to shareholders of record at the close of business on Aug 30, 2013 will not be paid to Met-Pro's shareholders.
Therefore, CECO has agreed to set its date for the payment of its third dividend, which is due during the current fiscal on a date that is at least two business days after the closing date of the proposed merger deal.
Post acquisition, CECO will become a market leader in air pollution control, product recovery and fluid handling technology. The products and offerings of both the companies perfectly complement each other and provide a wider portfolio of services. After the acquisition, CECO expects to serve a customer base of more than 11,500 worldwide. The combined businesses will offer a broader set of products and services through a truly end-to-end pollution control technology solution in an environment where customers are increasingly demanding comprehensive solutions from fewer vendors and service providers.
Apart from this, the acquisition will benefit CECO with a well-balanced geographic portfolio of products and services in key emerging markets. The transaction is expected to be accretive to CECO's earnings per share, margins and cash flow. The combined company expects to generate revenues of about $300 million and $9 million in cost synergies once operational.
CECO Environmental currently has a Zacks Rank #3 (Buy). Some other companies operating in the same industry and worth considering at the moment are Progressive Waste Solutions Ltd. (BIN - Snapshot Report) and Pure Cycle Corporation . Both companies have a Zacks Rank #2 (Buy).