Montreal-based industrial valve manufacturer Velan is being acquired by Texas-based industrial plumbing company Flowserve for a reported total of C$329 million.
Founded in Montreal in 1950 by Karel Velan, an immigrant engineer from Czechoslovakia, Velan is considered one of the industry leaders in high-tech valves for sectors such as nuclear energy, petrochemicals and industrial cryogenics. Listed on the Toronto Stock Exchange (VLN), Velan employs approximately 1,650 people and operates factories in nine countries.
According to its most recent quarterly results, announced a month ago, Velan was heading for revenue of US$380 million for its 2022-2023 fiscal year, down 3% from a year earlier. It was also heading towards an annual pre-tax profit of around 19 million US, down probably 23% over one year.
Flowserve, based in Dallas, Texas, is an industrial plumbing products and services provider with operations in approximately 50 countries.
Listed at US$4.4 billion on the New York Stock Exchange, Flowserve ended its 2022 fiscal year with pre-announced revenue of around US$3.6 billion, and an order book up 30%, at 2.7 billion US.
In its announcement of the purchase of Velan, Flowserve’s senior management says it wants to maintain a “strong presence in Quebec, in particular by keeping Velan’s headquarters in Montreal”.
But in its announcement to its shareholders, Flowserve also indicates that it anticipates operating cost synergy savings of around US20 million in the two years following the closing of the transaction.
“With its enviable position in the nuclear, cryogenic, industrial and defense markets and its portfolio of highly complementary products, Velan reinforces our strategy of diversification, decarbonization and digitization. […] providing us with significant aftermarket revenue and synergy opportunities,” said Scott Rowe, President and CEO of Flowserve, in the announcement to equity investors.
For Velan shareholders, the cash purchase price of C$13 per share agreed with Flowserve represents a premium of just over 100% to the 30-day average price of Velan shares on the Toronto Stock Exchange .
Velan’s minority shareholders will be asked to vote on this transaction at a special meeting even though it has already been accepted and recommended by Velan’s board of directors and controlling shareholders, i.e. the family of founder Karel Velan.
Board Chairman James Mannebach says the sale agreement with Texas-based Flowserve represents “the culmination of a comprehensive and robust process of reviewing strategic options aimed at maximizing shareholder value. by Velan.
According to Mannebach, this deal, worth a total of C$329 million, “provides Velan shareholders with the opportunity to realize an immediate and attractive premium on their shares.”
As for the business continuity of the company, its chairman of the board says that “we see a bright future for Velan within Flowserve’s leading global business. […] and we look forward to working with their team to quickly integrate the business and realize the significant benefits of this combination of complementary entities.”