K-Tron parent's acquisition of Coperion banks on company synergies, US polymers renaissance
With the acquisition completed, annual revenues of Hillenbrand’s Process Equipment Group will exceed $1 billion, as Coperion is expected to join the group’s three current operating companies: K-Tron, focused primarily on feeding and pneumatic conveying equipment; Rotex, maker of separation equipment, including gyratory screeners and sifters; and TerraSource Global, which makes size reduction equipment, conveying systems and screening equipment.
The companies say the combination of these process-industry equipment suppliers will generate synergies accretive to a strategy of building a global “platform” addressing a broad range of process-industry equipment needs. But the acquisition also addresses a specific opportunity unveiling itself here in the U.S.
Right time, right place
The addition of Coperion is complementary to the Hillenbrand Process Equipment Group’s over-all strategy, Hillenbrand CEO Kenneth A. Camp says, because “Coperion has experience as a provider of very large systems. It has strength in Asia and other geographical regions, but needs greater presence in the U.S. Our companies have that U.S. presence and will now have the parts and service operations around the globe that will allow us to grow global equipment sales.”
In addition, “We believe that we’re on the cusp of a rebirth of U.S. polymers production, “Camp says. “In past decades polymer production migrated to oil-production countries so as to be near needed feed stocks.”
More recently, as is well known, hydraulic fracturing and horizontal drilling in the U.S. is unlocking shale gas formations and changing that picture. Camp says natural gas can and will be a viable feedstock for polymer production.
“The U.S. is expected to be a major player in this transformation,” Camp says. “At the moment, more than 15 polymer plants are in various stages of planning, building or equipment specification in the U.S.” Coperion’s compounding and extrusion systems directly address this polymer market, as well as being relevant for other process industries targeted by the equipment group.
Gunter Bachmann, currently Coperion‚Äôs CEO, plans to continue as president of Coperion, reporting to Joe A. Raver, president of Hillenbrand‚Äôs Process Equipment Group. Coperion‚Äôs headquarters will remain in Stuttgart, Germany.
From Bachmann’s point of view as a systems supplier, the acquisition, “gives us the ability to sell systems that include embedded expertise related to core processing steps. We are very familiar with Hillenbrand‚Äôs Process Equipment Group operating companies, particularly K-Tron.‚Äù
The $530 million price tag includes the assumption of an estimated €76 million of net debt and €100 million pension liability. The transaction is expected to close in December or January, depending upon satisfaction of certain conditions, including receipt of applicable regulatory approvals. The transaction is expected to be accretive to Hillenbrand‚Äôs earnings per share beginning in the first year, net of acquisition costs.
Coperion is currently a portfolio company of Deutsche Beteiligungs AG. During the trailing 12-month period ended September 30, 2012, Coperion‚Äôs revenue was €520 million ($675 million) and earnings before interest, taxes, depreciation and amortization (EBITDA) was €38.7 million ($50.2 million). This includes €4.5 million ($5.8 million) of interest expense related to the assumed pension liability. Adjusted EBITDA, which excludes €6.7 million of restructuring charges, was €45.4 million ($58.9 million).