Ingersoll Rand Inc. (IR), a provider of flow control and industrial solutions, inked a deal to buy Seepex GmbH in an all-cash transaction worth €431.5 million. Shares jumped 3.1% to close at $46.92 on June 21.
Based in Germany, with facilities in North America and the Asia Pacific, Seepex manufactures progressive cavity pumps, which primarily serve the water, wastewater, food and beverage, and chemical end markets. The company has an annual turnover of around €160 million.
The deal, subject to certain regulatory approvals, is expected to close in the third quarter. Upon completion, Seepex is to be combined with IR’s Precision and Science Technologies (PST) segment. The acquisition increases the PST segment’s total addressable market by 30% to approximately $7.3 billion. (See Ingersoll Rand stock chart on TipRanks)
Vicente Reynal, IR’s CEO said, “Seepex has an exceptional historic organic growth profile with a high single-digit revenue CAGR since 2017 with double-digit growth expected in 2021, supported by a solid installed base of over 210,000 pumps and recurring aftermarket business that is already above 40% of its total annual revenue.”
The company expects to yield a post-synergy Adjusted EBITDA purchase multiple of low-double digits by the third year of ownership.
Seepex possesses a solid patent portfolio including a market-ready, commercially viable digital platform that enables various digital revenue streams – from e-commerce to full-scale software as a service (SaaS). Seepex has invested around €10 million to build this platform and Ingersoll Rand plans to scale this digital capability across the whole PST segment.
Credit Suisse analyst John Walsh recently initiated coverage of the stock with a Hold rating and lifted the price target to $51 from $50, implying 8.7% upside potential from current levels.
According to Walsh, in a recent investor conference, Ingersoll Rand stated that as the COVID-19 situation comes under control, the company is on track to meet its guidance of mid-teens growth in the first half and high-single digits growth in the second half of the year.
With 7 Buys and 2 Holds, the stock has a Strong Buy consensus rating. The average Ingersoll Rand analyst price target of $56.67 implies 20.8% upside potential from current levels. Shares have gained 60% over the past year.
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