CLEVELAND – Parker Hannifin Corporation (NYSE:PH), the global leader in motion and control technologies, today announced that it has entered into a definitive agreement to acquire LORD Corporation for approximately $3.675 billion in cash. The transaction has been approved by the Board of Directors of each company and is subject to customary closing conditions, including receipt of applicable regulatory approvals.
LORD, headquartered in Cary, North Carolina, is a privately-held company founded in 1924 offering a broad array of advanced adhesives, coatings and specialty materials as well as vibration and motion control technologies. LORD’s products are used in mission-critical applications in the aerospace, automotive and industrial markets. LORD has annual sales of approximately $1.1 billion and employs 3,100 team members across 17 manufacturing and 15 research and development facilities globally.
“This strategic transaction will reinforce our stated objective to invest in attractive margin, growth businesses, such as engineered materials, that accelerate us towards top-quartile financial performance,” said Tom Williams, chairman and chief executive officer of Parker. “LORD will significantly expand our materials science capabilities with complementary products, better positioning us to serve customers in growth industries and capitalize on emerging trends such as electrification and lightweighting. “This transaction will meaningfully transform our portfolio. We anticipate a smooth closing of the transaction and integration of our two businesses, and through adoption of The Win Strategy™ we believe we can capture significant operational synergies. The combination of Parker and LORD is expected to drive significant value for Parker shareholders and be accretive to organic growth, EBITDA margins, cash flow and EPS, excluding one-time costs and deal related amortization.”
Ed Auslander, president and CEO of LORD, commented. “With complementary business segments, coming together with Parker enables LORD to carry out our grander vision. Parker is already a large tier one supplier in many areas, allowing our business lines immediate access to growth, additional markets, applications and new customers. In addition, the two companies are very much aligned when it comes to core values, great business acumen and cultural fit.”
Delivers Compelling Financial and Strategic Benefits
• Greatly Expands Parker’s Engineered Materials Business Adding Strong Brands: LORD’s unique and proprietary products, solutions and technologies for mission-critical applications will increase Parker’s overall engineered materials product and solutions offerings to enable a stronger value proposition for customers. LORD’s portfolio includes strong brands such as LORD®, Chemlok®, FUSOR®, Maxlok®, LORD Adhesives®, Versilok®, LokRealease®, CoolTherm®, LORD® High Capacity Laminate (HCL) Elastomeric Bearings, Dynaflex®, and SensorCloud™. These brands reflect trusted, safe and reliable products that deliver critical solutions at a high value.
• Complementary Products and Markets: LORD will strengthen Parker’s offering of complementary products in core aerospace and defense, high-value automotive and industrial markets and enhance opportunities to capitalize on emerging electrification and lightweighting trends. LORD serves a global, blue-chip customer base and consistently serves partners through the entire product lifecycle.
• Substantial Synergy Potential: Parker expects to realize approximately $125 million in pre-tax run-rate cost synergies by full-year 2023. The cumulative cost to achieve these synergies is expected to be approximately $80 million. Synergies are expected to come from implementation of Win Strategy initiatives such as supply chain and lean productivity, and SG&A. Cross-selling opportunities and global market distribution are expected to provide incremental revenue synergies over time.
• Adds Significant Shareholder Value and is Accretive to EBITDA Margins: The transaction is expected to be accretive to Parker’s organic growth, EBITDA margins, cash flow and EPS within the first 12 months, and to achieve high single-digit ROIC by year five, after adjusting for one-time costs and deal related amortization.
Organization and Leadership
Upon closing of the transaction, LORD will be combined with Parker’s Engineered Materials Group.
Williams added, “We look forward to joining our teams and cultures, each of which places significant focus on safety, engaged people participating in high performance teams, customer experience, profitable growth and top quartile performance. Our shared values, built over the long histories of both companies, make our two companies an ideal match.”
Financing and Dividend
Parker plans to finance the transaction using new debt. Following the completion of the transaction, Parker expects to maintain a high investment grade credit profile.
The transaction is not expected to impact Parker’s dividend payout target of approximately 30-35% average percent of net income over a five-year period, while maintaining its record of annual dividend increases.
Approvals and Time to Closing
The transaction is expected to be completed within the next four to six months and is subject to customary closing conditions, including receipt of applicable regulatory approvals.
Barclays is serving as financial advisor and Cravath, Swaine & Moore LLP is serving as legal counsel to Parker. Morgan Stanley & Co. LLC is serving as financial advisor and Jones Day is serving as legal counsel to LORD.
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