Calgon Carbon Corporation and Japan’s Kuraray Co., Ltd. have entered into a definitive merger agreement under which the former will be acquired by Kuraray for $21.50 per share in cash or an equity value of roughly $1.1 billion. The transaction value exceeds $1.3 billion when Calgon Carbon’s net debt is considered.
Boards of directors of both companies have unanimously approved the deal, which remains subject to closing certain conditions, including the approval by Calgon Carbon stockholders and other regulatory approvals. The parties are expecting to close the deal by the end of December 2017.
Following the announcement, shares of Calgon Carbon jumped more than 62% on Sep 21 and closed the day at $21.40.
Significance of the Deal
The acquisition will be closed through a merger of a newly formed subsidiary of Kuraray with and into Calgon Carbon, with the latter as the surviving corporation. The deal is expected to improve Kuraray’s global presence and growth strategy in filtration media and activated carbon. It also aims to enable Calgon Carbon operate as Kuraray’s separate subsidiary. Both companies will align the operation and organization for optimizing customer support from Calgon Carbon’s headquarters in Pittsburgh, PA.
Calgon Carbon and Kuraray have complementary products and services. The combined entity will remain focused on providing the highest quality filtration media and activated carbon products, services and equipment for customers around the world.
Shares of Calgon Carbon have moved up 47.1% in the last three months, significantly outperforming the industry’s 0.4% dip.
Q2 Performance & Outlook
Calgon Carbon reported net income of $5.9 million or 12 cents per share in second-quarter 2017, compared with a profit of $7.9 million or 15 cents recorded a year ago. Barring one-time items, adjusted earnings were 14 cents per share that were in line with the Zacks Consensus Estimate.
Net sales increased around 15.4% year over year to $153 million, beating the Zacks Consensus Estimate of $150.6 million.
Calgon Carbon, in its second-quarter earnings call, noted that its performance benefited from improved year-over-year demand of activated carbon products and services, steady execution from New Business to achieve robust quarterly sales growth and the company’s diverse end markets. The company is also optimistic about its industrial sector customers.
Calgon Carbon expects sales and profitability to improve in the second half of 2017. The company also expects growth in its legacy business sales for the full year, which is expected to benefit from improved demand of activated carbon products in North America.
Zacks Rank & Key Picks
Calgon Carbon currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products space are Caterpillar, Inc. (CAT - Free Report) , China National Materials Company Limited and Terex Corporation (TEX - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Caterpillar has an expected long-term earnings growth rate of 9.5%.
China National Materialshas an expected long-term earnings growth rate of 20%.
Terex has an expected long-term earnings growth rate of 19.7%.
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