Gardner Denver, KKR reach deal; shareholder approval sought

Posted: Mar. 8, 2013 6:41 am Updated: Mar. 29, 2013 7:15 am

Herald-Whig Senior Writer

Gardner Denver Inc. and KKR & Co. have "entered into a definitive merger agreement" that has a total value of $3.9 billion, according to a joint release from the companies.

Under the agreement, KKR will buy Gardner Denver shares (NYSE: GDI) for $76 each. KKR also will assume debt of about $160 million. Gardner Denver's board of directors has approved KKR's offer, which still must be approved by Gardner Denver shareholders. If approved, the transaction is expected to close in the third quarter of 2013.

"Our success and this positive development is a testament to our dedicated employees who will continue to build on the momentum that our team has worked so hard to create," Gardner Denver President and CEO Michael Larsen said.

The deal caps months of negotiations between Gardner Denver and suitors seeking to buy the international manufacturer of industrial pumps, compressors and other highly engineered equipment. Gardner Denver has about 6,400 people and posted sales of about $2.4 billion last year. The company was founded in Quincy in 1859 and has about 300 workers at factory along Gardner Expressway.

KKR is a New York private-equity firm that buys out companies it sees as good investments. KKR bought out two other companies in the industrials sector during recent years. According to The Wall Street Journal, KKR agreed in April 2011 to acquire Capsugel, a unit of pharmaceutical giant Pfizer Inc. that makes medicines in capsule form. Later that year, KKR agreed to acquire Capital Safety Inc., a large provider of safety products and equipment for construction and other workers.

KKR bid $75 per share for Gardner Denver on Feb. 21, the deadline set by financial advisor Goldman Sachs for purchase proposals. Negotiations during the past two weeks resulted in an additional $1 per share as well as debt.

"Gardner Denver is an outstanding business with a rich heritage of manufacturing excellence, innovation and quality that spans well over 100 years," said Pete Stavros, head of KKR's industrial investments team.

"The company has an impressive group of talented and dedicated employees and we look forward to working closely with them to drive future growth and value. The long-term future of Gardner Denver is bright," Stavros said.

Gardner Denver officials began to consider a company buyout last year after another equity capital group began to seek a change. Barry Pennypacker resigned as Gardner Denver's CEO on July 16. ValueAct Capital, which held 5 percent of the company's shares, then called for the board of directors to sell Gardner Denver to "boost shareholder value."

Larsen was named CEO after Pennypacker's departure.

Gardner Denver announced in August that it would shut down some of its European manufacturing facilities and trim its work force to reduce costs. That move came after the company reported a 36 percent drop in orders for the company's engineered products division -- mostly petroleum and industrial pumps -- during the second quarter of last year.

On Oct. 25, the company confirmed that it had hired Goldman Sachs Group Inc. to study options, including a sale or merger.

SPX Corp., a competitor, offered $85 a share for Gardner Denver in December but withdrew from the deal. SPX officials said they could not secure financing at favorable terms, but published reports quoted board members who opposed the purchase at that price.

Gardner Denver stock opened at $74.77 today.


Editor's Note: This story has been updated.