Back to top

Analyst Blog

AB SKF (SKFRY) announced last week that it has signed a definitive agreement with Kaydon Corporation to acquire the latter for $35.50 a share (aggregate value $1.25 billion) in an all cash transaction. Subject to regulatory terms and conditions, the deal is expected to close during the fourth quarter of 2013. Barclays PLC (BCS - Analyst Report) is the exclusive financial advisor to Kaydon while JP Morgan will act as the exclusive financial advisor for AB SKF.

The deal is a win-win situation for the both the companies. Through this acquisition, AB SKF, Sweden-based provider of rolling bearings, seals, mechatronics, and lubrication systems, will strengthen its position as a global industry leader. For Kaydon, the deal is a strategic fit for its existing line of business and it is expected to accelerate their growth strategies.  

Further, the transaction also offers a boost shareholders value. This all cash deal provides a 22% premium to Kaydon’s closing stock price on Sep 4, 2013 and a 21% premium to Kaydon’s 30-day volume weighted average stock price. Further, the total enterprise value of $1.25 billion reflects 12.7x Kaydon's LTM Adjusted EBITDA ($98 million as of Jun 29, 2013).

Since the businesses complement well, the deal is expected to create significant geographical and manufacturing synergies enabling AB SKF to serve its customers and distributors better. SKF expects to achieve major synergies over the next several years with annual cost synergies of $30 million and $50 million in sales synergies. Post acquisition, AB SKF will become a knowledge engineering company as it strengthens its technology segment and expands AB SKF’s North American manufacturing footprint. 

According to the agreement, AB SKF will begin a tender offer on or after Sep 16, 2013 to purchase all of Kaydon’s outstanding shares. Further, under the terms of the agreement, Kaydon has the right to request third parties regarding alternative acquisition proposals till Oct 15, 2013, under the 40-day Go-shop Period procedure.

However, until Kaydon’s board of directors makes a decision regarding a superior potential proposal, Kaydon’s management will not disclose any matter pertaining to it. Further, it has also been mentioned that there can be no assurance that this process will result in a superior proposal. Kaydon will pay SKF customary breakup fees with regard to the termination of the agreement in case of any such superior proposal.

AB SKF is a leading global supplier of products, solutions and services within rolling bearings, seals, mechatronics, services and lubrication systems. Its services include technical support, maintenance services, condition monitoring, asset efficiency optimization, engineering consultancy and training.

Kaydon Corporation is a leading designer and manufacturer of bearings and velocity control products such as industrial shock absorbers, gas springs and vibration isolation products. Their specialty products include filters and filtrations systems, custom rings and seals as well as environmental services.

Both Kaydon and AB SKF have a Zacks Rank #2 (Buy). 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%