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ITT Corp. to Buy Wolverine Automotive Holdings for $300M

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ITT Corp. (ITT - Free Report) disclosed a deal to acquire Wolverine Automotive Holdings Inc. for a purchase price of about $300 million. The company has planned to finance this buyout with its existing cash balance and revolving credit facility. The transaction is anticipated to complete in the fourth quarter of this year, upon fulfillment of customary closing conditions and appropriate regulatory approvals.

Wolverine Automotive Holdings, the parent company of Wolverine Advanced Materials LLC, is one of the leading global developer and manufacturer of customized technologies for automotive braking systems and specialized sealing solutions meant for harsh environment applications across industries. On the other hand, Wolverine Advanced Materials, which accounts for 40% of the revenues of its parent firm, boasts an immense repute for material science-based solutions and significant aftermarket content on a global platform.

This deal is at par with ITT’s comprehensive strategic plan, which comprises of acquisitions in the targeted market to facilitate expansion. This particular buyout will vertically integrate Wolverine Advanced Materials’ automotive supplier capabilities and unfold varies expansion opportunities for ITT. Going forward, ITT can utilize the elastomeric technologies of Wolverine for creation of new aerospace and industrial applications. Alongside, the company will be competent to leverage its automotive and industrial channels for fueling growth in seals for pumping applications.

Talking about the financial benefit, Wolverine Advanced Materials projects to reap revenues of about $180 million and adjusted EBITDA of around $38 million in 2015. This is expected to be accretive to ITT’s earnings in the first full year after the closure of the agreement.

Apart from the abovementioned gains, we believe this debt-free acquisition will also support the capital deployment strategy of ITT. Over the past few years, this highly engineered solutions provider has been continuing with its organic investments in motion technologies business to maximize the production levels. Furthermore, the company plans to carry on with its investments in automotive business in China, LEAN transformation initiative and IT infrastructure capability building. Such targeted investments will allow the company to lay a strong foundation, which is expected to act as a key driver for solid long-term organic growth.

ITT currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include AO Smith Corp. (AOS - Free Report) , Dycom Industries Inc. (DY - Free Report) and China Railway Construction Corporation Limited . All stocks carry a Zacks Rank #1 (Strong Buy).

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