Parker Hannifin will acquire CLARCOR, a Tennessee-based global manufacturer of mobile, industrial and environmental filtration products with annual sales of about $1.4 billion, for approximately $4.3 billion in cash and the assumption of net debt.
CLEVELAND, Ohio - Parker Hannifin Corp. has agreed to acquire CLARCOR Inc., a Tennessee-based global manufacturer of mobile, industrial and environmental filtration products with annual sales of about $1.4 billion, for approximately $4.3 billion in cash and the assumption of net debt, the two companies announced early Thursday.
Under a transaction unanimously approved by both companies' boards of directors, Parker will buy all of CLARCOR's outstanding shares for $83 per share cash, a 17.8 percent premium over CLARCOR's closing price of $70.45 on Nov. 30. CLARCOR's shares opened at $81.74 per share on Thursday, and have stayed above $82 all day.
The purchase price is also a 29.2 percent premium to CLARCOR's volume-weighted average share price over 90 days, and a 17.1 percent premium over CLARCOR's all-time and 52-week high of $82.94.
The transaction, expected to close by or during the first quarter of Parker's 2018 fiscal year, is subject to customary closing conditions, including approval by CLARCOR's shareholders and other regulatory approvals.
Parker, founded in 1917 as the Parker Appliance Co., is a Fortune 250 global leader in motion and control technologies in the mobile, industrial and aerospace industries that aspires to help solve the world's greatest engineering challenges. It employs about 49,000 globally, including about 1,900 in Northeast Ohio and 625 at its Mayfield Heights headquarters.
Parker, which reported annual sales of $11 billion in fiscal 2016, expects to finance the deal with cash and new debt. It does not expect the transition to impact its dividend payout target of about 30 percent of net income, or its record of annual dividend increases.
Parker said CLARCOR, founded in 1904 and now based in Franklin, Tennessee, adds a broad number of industrial and and environmental air and liquid filtration products and related technologies to Parker's portfolio. CLARCOR has 6,000 employees around the world.
Parker Hannifin Chairman and CEO Thomas Williams. "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 Parker's Chairman and Chief Executive Tom Williams, in a written statement.
"The combination of Parker and CLARCOR is highly complementary and offers a great opportunity to combine our strength in international markets and OEMs [original equipment manufacturers] with CLARCOR's strong U.S. presence and high percentage of recurring sales in the aftermarket."
Not only will acquiring CLARCOR's filtration business strengthen Parker's share and market position in what it sees as a growing and resilient industry, Parker also expects its Filtration Group to keep benefiting from higher revenues, because CLARCOR generates 80 percent of its revenue from aftermarket sales.
"We also believe our cultures and values are an excellent match," Williams said. "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."
Chris Conway, chairman, president and CEO of CLARCOR Inc. Chris Conway, chairman, president and CEO of of CLARCOR, said in the same statement that "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."
"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."
Among the transaction's "compelling financial and strategic benefits" are:
-- Parker expects to save about $140 million in annual operating costs three years after the deal closes, after consolidating the companies' supply chains and implementing Parker's "Win Strategy" throughout CLARCOR's business.
-- After the one-time transaction costs, the deal is expected to contribute to Parker's cash flow, profits and EBITDA margins (earnings before earnings before interest, tax, depreciation and amortization).
-- Adding CLARCOR's portfolio of brands -- including CLARCOR, Baldwin, Fuel Manager, PECOFacet, Airguard, Altair, BHA, Clearcurrent, Clark Filter, Hastings, United Air Specialists, Keddeg and Purolator -- will enable Parker to provide better and expanded filtration solutions to its customers.
-- CLARCOR's capabilities will also strengthen and enhance the rest of Parker's technologies, enabling the company to provide even better motion and control systems to customers.
-- Parker expects to take advantage of the two companies' complementary filtration technologies, products, markets, and geographic areas to further accelerate growth.
After the acquisition, CLARCOR will become part Parker's Filtration Group to form an even larger and more diverse global filtration business.
Parker's financial advisor is Morgan Stanley & Co. LLC, and its legal advisors are Jones Day and Thompson Hine LLP.
CLARCOR's financial advisor is Goldman, Sachs & Co., and its legal advisors are Bass, Berry & Sims PLC and Baker & McKenzie LLP.
Parker Hannifin's shares were trading at above $143 by mid-day, 3 percent above Wednesday's close of $138.93.