Parker-Hannifin (PH) to Acquire CLARCOR (CLC) in $4.3B Deal
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Parker Hannifin Corporation (NYSE: PH) and CLARCOR Inc. (NYSE: CLC) announced that the companies have entered into a definitive agreement under which Parker will acquire CLARCOR for approximately $4.3 billion in cash, including the assumption of net debt.
Under the terms of the agreement, Parker will purchase all of the outstanding shares of CLARCOR for $83.00 per share in cash. This represents a premium of approximately 17.8 percent to CLARCOR’s closing share price on November 30, 2016 and a premium of approximately 29.2 percent to CLARCOR’s volume weighted average share price over 90 days and a premium of approximately 17.1 percent to CLARCOR’s all-time and 52-week high. The transaction has been unanimously approved by the Board of Directors of each company.
CLARCOR, headquartered in Franklin, TN, is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products with annual sales of approximately $1.4 billion and 6,000 employees worldwide. CLARCOR adds a broad array of industrial air and liquid filtration products and technologies to Parker’s filtration portfolio.
“This strategic transaction is consistent with our stated objective to invest in businesses that accelerate Parker towards our goal of top quartile financial performance,” said Tom Williams, Chairman and Chief Executive Officer of Parker. “The combination of Parker and CLARCOR is highly complementary and offers a great opportunity to combine our strength in international markets and OEMs with CLARCOR’s strong U.S. presence and high percentage of recurring sales in the aftermarket.”
Williams added, “We also believe our cultures and values are an excellent match. CLARCOR, like Parker, prides itself on a long and successful history that reinforces entrepreneurialism and innovation. We’re confident that the goals and measures outlined in the Win Strategy™ will guide a seamless integration and generate significant synergies. This transaction delivers immediate cash value to CLARCOR shareholders and is expected to create sustained value for Parker shareholders. Together, Parker and CLARCOR will advance our commitment to engineer the success of our customers and team members and enhance shareholder value.”
“Joining Parker provides a terrific opportunity to accelerate our mission of making our world cleaner and safer while delivering an immediate and substantial cash premium to our shareholders and bolstering the confidence of our customers,” said Chris Conway, Chairman, President and Chief Executive Officer of CLARCOR. “We believe Parker is an ideal fit for CLARCOR as it shares both our culture and our passion for developing solutions to our customers’ complex filtration challenges. Becoming part of Parker, with its significant systems expertise and stellar reputation for quality and innovation, should only enhance and accelerate our strategic initiatives and technology development efforts, expand our growth plans and provide new opportunities for many of our employees. We are looking forward to working together with the Parker team to ensure a smooth combination of our businesses and operations and bring these goals to fruition.”
Compelling Financial and Strategic Benefits
- Significant Operating Synergies: Parker expects to realize annual run rate cost synergies of approximately $140 million three years after closing through a variety of initiatives, including the consolidation of the companies’ supply chains and a successful implementation of Parker’s Win Strategy™ throughout CLARCOR’s operations.
- Accretive to Parker’s Cash Flow, EPS and EBITDA Margin: The transaction is expected to be accretive to Parker’s Cash Flow, EPS and EBITDA margins, after adjusting for one-time costs.
- Significantly Enhances Parker’s Filtration Group: The combination of the companies’ complementary filtration offerings strengthens Parker’s position in a growing and resilient business.
- Strong Recurring Revenue Opportunities: Parker expects to benefit from increased recurring revenue streams as approximately 80 percent of CLARCOR’s revenue is generated through aftermarket sales. The addition of CLARCOR is expected to significantly increase recurring revenue in Parker’s Filtration Group.
- Enhances Parker’s Product Portfolio with Leading Brands: With the addition of CLARCOR’s leading and respected brands, including CLARCOR, Baldwin, Fuel Manager®, PECOFacet, Airguard, Altair, BHA®, Clearcurrent®, Clark Filter, Hastings, United Air Specialists, Keddeg and Purolator, Parker expects to be better positioned to deliver enhanced and expanded filtration solutions to its customers. In addition, this transaction strengthens Parker’s systems capabilities and enhances the rest of Parker’s technologies, enabling the company to provide even better motion and control systems solutions to customers.
- Complementary Products, Markets and Geographic Presence: Parker expects to be able to leverage both companies’ complementary filtration technologies to further accelerate growth.
Organization and Leadership
Upon closing of the transaction, CLARCOR will be combined with Parker’s Filtration Group to form a leading and diverse global filtration business. Williams added, “We look forward to working collaboratively with CLARCOR team members to jointly build on CLARCOR’s great history. CLARCOR is a premier filtration company due to strong leadership, a great culture that is highly complementary to Parker’s, and an impressive breadth of products and technologies with talented team members contributing daily to its success.”
Financing and Dividend
Parker plans to finance the transaction using cash and new debt. Following completion of the transaction, Parker expects to maintain a high investment grade credit profile. Parker intends to make debt reduction a priority in the near term.
The transaction is not expected to impact Parker’s dividend payout target of approximately 30 percent of net income, while maintaining its record of annual dividend increases.
Approvals and Time to Closing
The transaction is expected to be completed by or during the first quarter of Parker’s fiscal year 2018 and is subject to customary closing conditions, including approval by CLARCOR's shareholders and receipt of applicable regulatory approvals.
Morgan Stanley & Co. LLC is acting as financial advisor to Parker and Jones Day and Thompson Hine, LLP are acting as legal advisors. Goldman, Sachs & Co. is acting as financial advisor to CLARCOR and Bass, Berry & Sims PLC and Baker & McKenzie LLP are acting as legal advisors.
Parker will host a conference call today, Thursday, December 1, 2016 at 8:30 AM Eastern Time to discuss the transaction. Interested parties are invited to listen to the webcast of the conference call, which can be accessed by visiting the Investor Relations section of Parker’s website at www.phstock.com.
A webcast replay will also be available on Parker's website in the Investor Relations section.
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