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October 30, 2019 09:34 AM

Parker Hannifin completes $3.6 billion acquisition of Lord Corp.

Scott Suttell
Crain's Cleveland Business
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    Parker Hannifin's headquarters

    MAYFIELD HEIGHTS, Ohio—Parker Hannifin Corp. completed another of its large takeovers this year.

    Mayfield Heights-based Parker, a maker of motion and control technologies, said in a news release issued Oct. 29, that it has finalized its $3.675 billion acquisition of Lord Corp., which makes advanced adhesives and coatings, as well as vibration and motion control technologies. The addition of Cary, N.C.-based Lord, which was disclosed in April, "creates a combined organization with strong materials science capabilities, electrification and aerospace product offerings that are highly complementary," Parker said in the release.

    The transaction "is expected to drive significant value for shareholders through increased organic growth, higher EBITDA margins, stronger cash flow and add to Parker's earnings per share, excluding one-time costs and deal related amortization," according to the release. Parker said Lord will strengthen its portfolio "of attractive margin and high growth businesses, and (will) significantly expand Parker's materials science capabilities with complementary products, better positioning Parker to serve customers in growth industries and capitalize on emerging trends such as electrification and lightweighting."

    Parker's stock at 11:45 a.m. on Oct. 29 was at $193.02 per share, up 1.4 percent from the close of Oct. 28. It's near the stock's 52-week high of $193.64. The 52-week low is $140.82.

    Lord will become part of Parker's Engineered Materials Group, and an "integration team" has been formed to help with the transition. Parker also said that a "detailed integration plan is underway, designed to allow for a smooth transition between Parker and Lord and to realize synergies between the two organizations."

    Lord, founded in 1924, makes products that are used in the aerospace, automotive and industrial markets. Its annual sales are about $1.1 billion. The company has 3,100 employees at 17 manufacturing and 15 research and development operations worldwide.

    Parker employs about 58,000 people globally. Its revenues last year topped $14.5 billion.

    When Parker detailed the Lord deal on April 29, it said in a news release that the transaction "is not expected to impact Parker's dividend payout target averaging approximately 30-35 percent of net income over a five-year period, while maintaining its record of annual dividend increases."

    Parker also said in the April release that it "expects to realize approximately $125 million in pretax run-rate cost synergies by full-year 2023. The cumulative cost to achieve these synergies is expected to be approximately $80 million. Synergies are expected to come from implementation of ... initiatives such as supply chain and lean productivity, and SG&A (selling, general and administrative expenses). Cross-selling opportunities and global market distribution are expected to provide incremental revenue synergies over time."

    Parker, in September, completed its $1.725 billion acquisition of Exotic Metals Forming Co., a manufacturer of high-temperature, high-pressure air and exhaust management solutions for aircraft and engines.

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