EnPro secures air springs business from ContiTech

CHARLOTTE, N.C.—EnPro Industries Inc. got what it wanted, while ContiTech A.G. did what it had to do.

In a bold and surprising move aimed at significantly bolstering and expanding its Stemco division, EnPro has agreed to purchase Veyance Technologies Inc.'s North American air springs business from ContiTech, a division of Continental A.G., in a cash transaction.

ContiTech, which acquired Fairlawn, Ohio-based Veyance in January, did not want to sell the air springs operation, company officials said when it purchased Veyance, because it was a valuable piece of the business with solid growth potential.

But it had no choice, as U.S., Mexican and Brazilian antitrust authorities mandated it do so in order to close the Veyance transaction.

Financial details on the sale of the Veyance air springs business were not disclosed. The transaction, which needs approval of antitrust authorities in North America, is expected to close in July, an EnPro spokesman said.

Noting that the acquisition is a unique opportunity for both companies, Jon Cocco, who heads the air springs operation for Veyance, said “EnPro has a proven track record of investing in both people and businesses, which is a great recipe for future success.”

Once the deal is finalized, the air springs business will be moved into the Stemco operation, which is part of Charlotte-headquartered EnPro's Sealing Products segment.

Included in the transaction are a research and development facility in Fairlawn and a production plant in San Luis Potosi, Mexico, where the air springs are manufactured, according to Stemco President Todd Anderson.

About 500 are employed at the Mexican factory and another 30 commercial and R&D employees are located at the Fairlawn site or at a Canadian office.

“The deal will also bring the existing air springs manufacturing, design and support teams onto the Stemco staff,” Anderson said in a letter to customers.

He said the air springs business “carries with it premium product performance. Customers will be able to count on the same consistent product performance and brand attributes, as the products will continue to be manufactured in the same facility and engineered by the same design team with the same support functions, in addition to gaining the support of the entire Stemco team.”

Bringing the acquired air spring business into the fold likely will boost Longview, Texas-based Stemco's sales about $100 million, making it about a third the size of Stemco's current operation, the EnPro spokesman said. “It will complement our current suspension offerings and certainly puts Stemco on the map.”

Anderson said the Veyance air springs operation's record of success and growth potential makes it a solid addition.

“Stemco's commercial vehicle market focus, superior product technology and outstanding reputation for training and customer support make this acquisition a complement to the Stemco business strategy.”

Meanwhile, ContiTech plans to move forward with all of its businesses, including its overseas air springs operation, a company official said.

In terms of suspension product production, the firm has a sizable business in Europe, parts of the Americas, Asia and elsewhere. “We have locations in Brazil, Germany, Hungary, Turkey, South Korea, China and India,” a spokeswoman said. “With those operations, we generated sales of about $335 million in 2014.”

She said that one of the company's strategies is “that we will be where our customers are. This means, of course, we will focus on Asia as well as on the Americas.”

EnPro's Stemco business will be a good home for Veyance's air springs operation in North America, according to Hans-Juergen Duensing, head of the ContiTech division and a member of the Continental executive board.

Both Continental and ContiTech are headquartered in Hanover, Germany.

When ContiTech announced the tentative agreement to buy Veyance in early 2014, company officials called it the most important acquisition in the firm's history. They noted that the company strengthened its global industrial business and reduced the percentage of the firm's sales tied to automotive, which was a strategic goal of the company.

After the takeover of Veyance, the proportion of ContiTech's industrial business increased to 54 percent from 42 percent, the company said.

Veyance had sales of almost $1.7 billion in 2014 globally, and about 90 percent of that comes from its industrial business. With its primary focus on belts, hose and drive belts, the firm generates about half its sales in the U.S., and has a strong presence in Latin America, Africa, China and other Asian countries.