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SKF is buying Kaydon Corporation for $1.25bn

06 September, 2013

SKF is buying the US-based bearings and velocity control manufacturer, Kaydon Corporation, for around $1.25bn, including $95m of debt. Kaydon, which makes bearings, velocity control products such as shock absorbers, and other specialised products, had sales worth $475m in 2012, with an operating profit of around 16% and more than 2,100 employees.

SKF says that Kaydon is complementary to its existing businesses from both a product and geographical perspective, and will enable it to:

•  better serve customers in many key industries globally with a more complete product portfolio;

•  reach customers in several segments that are less well represented in SKF's current customer base;

•  offer improved solutions and services by combining complementary Kaydon and SKF technologies;

•  distribute Kaydon products through SKF’s global distribution network; and

•  use Kaydon’s North American manufacturing facilities.

The acquisition is in line with SKF's strategy of strengthening its technology platforms and becoming a knowledge engineering company. It says that transaction will be accretive to its earnings in year one and expects annual cost synergies worth $30m and sales synergies worth $50m.

Part of Kaydon's Reali-Slim range of bearings

“We have followed the development of Kaydon for a long time,” says SKF president and CEO, Tom Johnstone. “They have a strong product portfolio, strong management and a solid financial performance and I am delighted that they will soon be part of the SKF Group.

“The complementary nature of their products and technologies, their geographical and customer presence and their manufacturing footprint will enable us to even better serve our customers and distributors in the industrial market worldwide,” Johnstone adds. “In particular, this acquisition, combined with our other activities, investments and acquisitions in the last few years, shows our strong commitment to the North American market.”

Kaydon has three business areas: friction control products (bearings); velocity control products (such as industrial shock absorbers, gas springs and vibration isolation products); and specialty products (including filters, filtrations systems, custom rings and seals, and environmental services). Kaydon is a leader in certain product categories, including split and thin-section bearings. It generates 62% of its sales in North America, 24% in Europe, 12% in Asia Pacific and 2% in the rest of the world.

“Our board believes that the proposed transaction represents a compelling value for our shareholders,” says Kaydon’s chairman and chief executive, James O’Leary. “We believe that this transaction represents an excellent strategic fit for Kaydon that will allow our market-leading businesses to accelerate their growth strategies by joining forces with SKF. I believe this is the right time for this transaction and SKF is the right partner to take our high quality portfolio of businesses to their next level of performance.”

The $1.25bn offer price is worth 12.7 times Kaydon’s adjusted EBITDA of $98m at the end of June. The transaction is expected to close in the fourth quarter of 2013. Under the terms of the agreement, Kaydon can solicit third parties for alternative acquisition proposals until October 15, 2013.

SKF has around 140 manufacturing sites in 28 countries and is represented in over 130 countries through its own sales companies and over 15,000 distributor locations. Its sales in 2012 were worth SEK64,575m ($968m) and it had 46,775 employees.




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