Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
US industrials Chart Industries and Flowserve have agreed a $19bn all-stock merger, in a push to create a leading provider of products and services addressing the movement of liquids and gases for sectors including LNG, nuclear energy and data centres.
Chart specialises in handling gas and liquids at extremely low temperatures largely aimed at industrial clients, while Flowserve caters to water and chemicals companies, offering pumps, valves, seals and flow control products and services.
The $19bn deal, which includes debt, was framed by both companies as a merger of equals and would help it compete with bigger groups in the so-called industrial processing sector, including US rivals Parker Hannifin, Ingersoll Rand and Dover.
As part of the deal, announced on Wednesday, Chart shareholders will receive 3.1 Flowserve shares for every existing share they own, giving them control of 53.5 per cent of the combined group and Flowserve shareholders holding the remainder.
Scott Rowe, Flowserve’s chief executive, will run the combined company, and Chart’s CEO Jill Evanko will become chair of the board. Rowe said the merger would give the newly formed entity “scale and resilience”, including delivering up to $300mn of cost synergies over the course of three years.
The merged group — which will be headquartered in Dallas, Texas, and be given a new name — generated about $8.8bn in revenues in the 12 months to the end of March. More than two-fifths of that came from after-market services, such as repairs, maintenance and upgrades.
The deal comes as mergers and acquisitions activity has slowed significantly in recent months as companies, particularly in the industrials sector, grapple with the fallout of the policy on their complex, often global supply chains.
Flowserve executives told analysts in April that the “vast majority” of its products sold in the US are manufactured and assembled domestically. Similarly, Chart said it “primarily” manufactures in China for China and in the US for the US.
During their most recent earnings calls, Flowserve said the gross impact of President Donald Trump’s trade policy on earnings without any changes or mitigations would be between $90mn and $100mn, while Chart estimated it would be approximately $50mn.
Chart shares were down 7.2 per cent in Wednesday morning trading on Wall Street, while Flowserve dropped 4 per cent, giving the groups market capitalisations of $6.8bn and $6.3bn respectively.
Management said they expected the deal to close in the fourth quarter of this year and to yield revenue synergies over time, delivering about 2 per cent in additional growth.
