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Dover (DOV) Divests Sargent Aerospace & Defense for $500M

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In line with its strategy of focusing on key growth spaces and end-markets, Dover Corporation (DOV - Free Report) has agreed to sell its Sargent Aerospace & Defense unit to RBC Bearings Incorporated (ROLL - Free Report) for $500 million.  The transaction, pursuant to customary closing conditions, is expected to close in the second quarter of 2015.  

Headquartered in Tucson, AZ, Sargent is a leader in precision-engineered products, solutions and repairs for aircraft airframes and engines, rotorcraft, submarines and land vehicles. It manufactures, sells, and services hydraulic valves and actuators, specialty bearings, specialty fasteners, seal rings & alignment joints, and precision components under leading brands including Kahr Bearing, Airtomic, Sonic Industries, Sargent Controls, and Sargent Aerospace & Defense. Sargent, which accommodates a workforce of over 750 employees in six facilities across three countries, generates annual sales of approximately $195 million.

In an effort to reduce its exposure to cyclical markets and focus on higher margin growth spaces, Dover has sold two businesses during the past three years for an aggregate consideration of $267.8 million in addition to the Knowles spin-off. Earlier this month, in a similar move, Dover sold its Datamax O'Neil unit to Honeywell International Inc. (HON - Free Report) for $185 million. The divestiture is expected to lead to over $50 million in annualized benefits. Both Sargent and Datamax O'Neil had been classified as discontinued operations in the fourth quarter of 2014.

On Jan 27, this diversified global manufacturer, reported fourth-quarter 2014 adjusted earnings from continuing operations of $1.01 per share, which increased 2% from the prior-year quarter earnings of 99 cents driven by revenue growth across all segments and strong volume leverage. Earnings also beat the Zacks Consensus Estimate of 95 cents per share.

Dover, however, trimmed its total revenue growth guidance for fiscal 2015 to the range of decline of 2% to growth of 1%, mainly due to lower oil prices. The company now expects full-year adjusted earnings per share in the range of $4.70 to $4.95, a 35 cents decline from the previous guidance.

Dover intends to remain focused on expanding its business in key markets that offer significant growth potential, leading to organic and inorganic growth at all segments. Moreover, the company strives to innovate its products as per customer needs in order to gain market share.

Going into 2015, the company sees robust shipments in Printing & Identification, Waste Handling and Fluids as well as benefits from recent acquisitions. Moreover, a strong balance sheet position and increase in dividend and bookings will help in the company’s long-term growth. However, decline in oil prices remains a matter of concern for Dover.

Dover is a diversified global manufacturer with annual revenues of $8 billion. The company delivers innovative equipment and components, specialty systems and support services through four major operating segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment.

Dover currently carries a Zacks Rank #4 (Sell). Stocks to consider in the machinery-general industrial industry are Landauer Inc. with a Zacks Rank #1 (Strong Buy).




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