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Ingersoll's (IR) Seepex Buyout to Hike PST's Growth Prospects

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Ingersoll Rand Inc. (IR - Free Report) yesterday announced that it agreed to acquire Bottrop, Germany-based Seepex GmbH. The transaction value has been fixed at €431.5 million in cash. This is the company’s second buyout since the start of 2021, and is believed to be a strategic fit for its existing businesses.

It is worth mentioning here that Ingersoll’s shares gained 3.12% yesterday, ending the trading session at $46.92.

Seepex specializes in manufacturing and providing progressive cavity pumps — including food, standard, metering, open hopper, semi-submersible and others. Prime markets served include chemical, water, food and beverage, and wastewater. It has facilities in the Asia Pacific and North America as well as an installed base of more than 0.21 million pumps.

Its aftermarket business (recurring in nature) accounts for more than 40% of revenues annually. In 2021, it is predicted to generate revenues of €160 million, with year-over-year growth in double-digits.

Inside the Headlines

As noted, the addition of Seepex to Ingersoll’s portfolio will strengthen the latter’s product portfolio, enhance its technical and digital capabilities, and boost its aftermarket growth opportunities. Also, Seepex’s presence in multiple end markets and geographies (especially in Europe, Asia and the Americas) and an employee base of 800 people will likely prove to be a boon for Ingersoll.

The acquired assets, upon completion, will form part of Ingersoll’s Precision and Science Technologies (“PST”) segment. The Seepex buyout is anticipated to increase PST’s total addressable market by $1.7 billion.

The PST segment manufactures products like doing and metering pumps (for use in multiple industries) and liquid and gas pumps for use in life sciences, lab and medical markets. Key brands are Hartell, Welch, ARO, Dosatron and others. In first-quarter 2021, the segment generated revenues of $215.7 million, reflecting growth of 12.2% from the year-ago quarter. Also, the top line represented 15.7% of the company’s total revenues in the quarter.

Upon the receipt of required regulatory approvals, Ingersoll anticipates completing the buyout in the third quarter of 2021.

Ingersoll’s Other Buyout Activities

The company believes in the expansion of product lines, strengthening footholds in existing and new markets, and expanding customer base through acquisitions. In the first quarter of 2021, acquisitions had a positive impact of 1.4% on the company’s sales. For 2021, it anticipates acquired assets to boost its sales by $60 million.

In February 2021, Ingersoll acquired Tuthill Vacuum and Blower Systems, and integrated it with its Industrial Technologies and Services segment. Also, it acquired Albin Pump SAS — a manufacturer of electric peristaltic pumps based in France — in September 2020. The buyout was added to Ingersoll’s PST segment.

Zacks Rank, Price Performance and Estimate Trend

With a market capitalization of $19.1 billion, Ingersoll currently carries a Zacks Rank #4 (Sell). The company faces headwinds from a highly leveraged balance sheet, exposure to international markets and high costs. However, efforts to improve growth opportunities through buyouts and other means might help.

In the past three months, the company’s stock declined 0.5% against the industry’s growth of 5.6%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

The Zacks Consensus Estimate for Ingersoll’s earnings is pegged at $1.71 for 2021 and $1.99 for 2022, reflecting declines of 8.6% and 5.7% from the 60-day-ago figures. Also, the estimate for second-quarter 2021 earnings at 39 cents reflects a decrease of 13.3% from the 60-day-ago figure of 45 cents.

Ingersoll Rand Inc. Price and Consensus

 

Ingersoll Rand Inc. Price and Consensus

Ingersoll Rand Inc. price-consensus-chart | Ingersoll Rand Inc. Quote

Other Industry Players Engaged in Buyouts

Three stocks from the same industry, which have engaged in acquisitions in the year-to-date period, are Helios Technologies, Inc. (HLIO - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) and IDEX Corporation (IEX - Free Report) . While both Helios and Applied Industrial carry a Zacks Rank #2 (Buy), IDEX carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In June 2021, Helios agreed to acquire Italy-based NEM S.r.l. (anticipated to be completed in third-quarter 2021), while it agreed to buy the electronic control systems and parts business of Shenzhen Joyonway Electronics & Technology Co., Ltd. in May (to be accomplished in third-quarter 2021). In January, Helios acquired assets of the engineering solution provider, BJN Technologies, LLC.

Then again, Applied Industrial acquired Gibson Engineering Company, Inc. in January 2021.

IDEX acquired Airtech Group, Inc. along with the US Valve Corporation and other entities in June 2021, while it bought Abel Pumps, L.P. along with its affiliates in March.

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