Flowserve (FLS) to Acquire MOGAS & Boost Product Portfolio

Acquisition Overview - Flowserve Corporation has signed a definitive agreement to acquire MOGAS Industries for $290 million in cash, with a potential earnout of $15 million [1] - The acquisition will be funded through cash and available debt financing [1] Company Profile - MOGAS Industries, based in Houston, TX, specializes in mission-critical severe service valves and related aftermarket services [2] - The company serves various end markets, including power, mining, and process industries, with a global presence in regions such as Europe, Canada, South America, Australia, China, India, and the Middle East [2] Strategic Rationale - The acquisition aligns with Flowserve's strategy to strengthen its business and product portfolio [3] - MOGAS will be integrated into Flowserve's Flow Control Division, enhancing its offerings in valves and valve automation products [3][4] - The addition of MOGAS' differentiated valve products and technical expertise will bolster Flowserve's position in mining, mineral extraction, and process industries [4] Growth Potential - The acquisition is expected to augment Flowserve's existing valve and automation product portfolio and accelerate its 3D growth strategy [5] - It will enhance Flowserve's direct exposure to mining and mineral extraction, improve aftermarket potential, and generate revenue growth synergies [5] Transaction Timeline - The transaction is anticipated to be completed in the fourth quarter of 2024, pending customary closing conditions [6] - It is projected to be accretive to Flowserve's adjusted earnings per share in the first full year post-closing [6] Current Business Performance - Flowserve is experiencing strong momentum in its Pump Division and Flow Control Division segments, with revenues in the Pump Division up 6.1% year over year in the second quarter [7] - The Flow Control Division's revenues increased by 9.4% year over year, driven by original equipment sales growth in multiple regions [8] - However, the company faces challenges with rising costs, as its cost of sales increased by 4.4% year over year to $790.8 million in the second quarter, with a 16.1% increase in 2023 [8] Competitive Landscape - Flowserve operates in a highly competitive market for pumps and valves, facing competition from established companies like Crane Co., Emerson Electric Co., and ITT Inc. [9]