Atlas Copco acquires Edwards Group in $1.6bn deal

October 2013 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Swedish engineering company Atlas Copco AB has agreed to acquire the Edwards Group Ltd in a deal worth $1.6bn. The deal, announced on 19 August, will see Atlas pay $10.50 per share for Edwards. The price includes an initial fixed payment of $9.25 per share with an additional $1.25 per share to be paid after closing, provided Edwards’ 2013 revenue and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) reaches predetermined levels.

Under the terms of the agreement Edwards’ 2013 revenue must fall within the range of £587.5m to £650m and the company must also achieve a related adjusted EBITDA target within the range of £113.9m to £145m.

This structured deal values the deal for British firm Edwards at $1.6bn, including $400m of net debt. The offer represents a 26 percent premium to the company’s 30 day average share price. According to a statement regarding the sale, Atlas intends to complete the acquisition of Edwards as an all cash transaction, utilising the firm’s own funds.

Both Atlas and Edwards expect the deal to be completed in the first quarter of 2014, although the transaction is still subject to customary closing conditions, including antitrust clearance and the approval of Edwards’ shareholders. Edwards’ board of directors has unanimously recommended the deal to shareholders. Subsequently, private equity firms CCMP Capital Advisors and Unitas Capital, which represent around 84 percent of all current outstanding shares, have announced that they have entered into voting agreements with Atlas in order to vote in favour of the deal.

Edwards employs around 3700 employees across 30 countries worldwide and is the market leader in vacuum pumps for the chemical and semiconductor industries. The company has enjoyed a great deal of international success in recent years, with a third of Edwards’ income being generated in the US and more than half from Asia. The company, despite its storied and successful history in Britain, now has something of an international flavour, with offices in a number of locations including China, Argentina and the US.

The addition of Edwards to the Atlas portfolio will come as a welcome relief to the Swedish firm. Atlas, which employs around 40,000 people worldwide, has faced a troubling time in its mining division in recent years. Indeed, the financial crisis has helped to create a particularly volatile global market for commodities. Edwards generated revenues of around £595m in 2012, and analysts have suggested the firm will add around 7 percent to Edwards’ sales this year. “Edwards is a technology leader with a well developed structure and solid customer relationships in industries we know well. It is a great fit for Atlas Copco,” said Ronnie Leten, president and chief executive officer of Atlas, in a statement. “The vacuum solutions market is growing and has similar characteristics to our existing industrial businesses” he added.

Despite its many successes, Edwards has suffered at the hands of the financial markets in recent years. The company had intended to float on the London Stock Exchange in 2011 before it abandoned that attempt. In 2012 the company successfully floated in the US but only after its IPO price was cut from the $11 to $13 range down to just $8. Predominantly, shares in Edwards have traded below the company’s flotation price for around the last 18 months.

Upon completion of the transaction, Edwards will continue to operate under the guise of a new Vacuum Solutions Division within the Atlas Copco Compressor Technique business area. The company will retain its headquarters in Crawley, UK. Jim Gentilcore, CEO of Edwards, said in a company statement “This strategically and financially compelling transaction provides the opportunity for our stockholders to receive an attractive premium for their shares. On top of the cash payment at closing, analyst consensus for the full year and our strong start to the third quarter leads us to believe it is realistic for us to achieve the results that would deliver an additional cash payment towards the upper end of the range to our shareholders.”

Richard Summerfield