By Bob Tita
Parker Hannifin Corp. announced plans Thursday to buy Clarcor Inc. for about $4 billion, providing access to the profitable market for replacement filters for trucks and construction equipment made by Caterpillar Inc. and others.
About 80% of Clarcor's $1.4 billion of annual sales comes from replacement filters also used on equipment such as excavators, railroad locomotives, farm tractors and natural gas-powered turbines
Parker makes hydraulic systems, electronics and other components for Deere& Co., General Electric Co., Boeing Co. and other equipment manufacturers whose products typically remains in service for a long time, requiring service and replacement parts.
"I would characterize this as a hand-in-glove of our two companies being put together," said Tom Williams, Parker Hannifin's Chief Executive
Following the acquisition, Parker's filtration business is expected to generate $2.6 billion a year in sales, or about 20% of total revenue.
Franklin, Tenn.-based Clarcor maintains a portfolio of well-known aftermarket filter brands, including Purolator, Baldwin and Clark.
Parker has agreed to pay $83 a share for Clarcor's stock, an 18% premium to its closing price Wednesday. Parker is funding the deal with cash and debt. The companies valued the deal at $4.3 billion including debt.
Clarcor's stock was recently trading up 16.9% at $82.38.
Cleveland-based Parker expects the acquisition to increase earnings per share, after certain costs are taken out, but didn't offer specific details. It is expected to yield annual cost savings of about $140 million in the third year after closing.
The proposed deal is expected to be completed by the first quarter of Parker's next fiscal year, which begins July 1, 2017. It has been approved by both companies' boards, but will require approval by Clarcor shareholders as well.
Mr. Williams said he doesn't expect the acquisition will require any divestitures to comply with antitrust regulations, based on the investigation the companies did before the deal.
Parker's stock was recently up 2.9% at $142.89.
Austen Hufford contributed to this article.
Write to Bob Tita at email@example.com
(END) Dow Jones Newswires
December 01, 2016 14:33 ET (19:33 GMT)
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