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Lincoln Electric Holdings Inc. (LECO - Analyst Report) recently announced the acquisition of has Chattanooga-based Tennessee Rand Inc., a privately held manufacturer of tooling and robotic systems for welding applications, for an undisclosed amount.
Tennessee Rand, with annual sales of approximately $35 million, primarily serves the automotive and metal fabrication customers. The acquisition is expected to fortify Lincoln Electric’s market leading position in welding automation in North America. Tennessee Rand’s extensive tool design, system building, and machining capabilities will enable Lincoln to further expand its welding automation business.
This acquisition is in sync with Lincoln Electric’s earlier buy of privately held automated systems and tooling manufacturer, Wayne Trail Technologies, Inc, in May 2012. Wayne Trail is a leading designer and supplier of flexible, automated systems for metal forming, metal fabricating and metal joining applications. The acquisition expanded the company’s wide range of welding and automated solutions for customers both in the U.S. and international front.
These acquisitions are in line with the goals that Lincoln seeks to achieve by 2020. The company expects to double its market share and achieve compound annual revenue growth of 10% or more. Further, the company expects return on invested capital in surplus of 15% through 2020. These achievements will continue to strengthen Lincoln’s position as one of the strongest and successful welding companies worldwide.
Lincoln Electric invests significantly in acquiring new businesses in North America as the region contributes more than 50% to its business and has proved to be the strongest geographic region for the company. The recent addition of Tennessee Rand will further enhance the company’s product portfolio and help it to serve a wider customer base.
However, weak global economic condition will be headwind going forward. Moreover, slow growth rates in the North America welding segment is an added concern. We currently have a Zacks #4 Rank (short-term Sell rating) on the stock.
Cleveland, Ohio-based Lincoln Electric designs, develops and manufactures arc welding products, robotic arc-welding systems, plasma and oxyfuel cutting equipment and commands a leading position in the brazing and soldering alloys market. Actuant Corporation (ATU - Analyst Report), Flow International Corporation and Stanley Black & Decker, Inc. (SWK - Analyst Report) are other Zacks #4 Rank stocks in the same industry.

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