Parker Hannifin on Monday announced it has agreed to buy LORD, a privately held manufacturer of advanced adhesives and coatings and other specialty materials, for about $3.68 billion.
In a statement, Parker Hannifin said LORD’s product set would strengthen its aerospace and defense businesses and its high-value automotive and industrial businesses.
LORD, which has sales of $1.1 billion, also provides vibration and motion control technologies in those markets.
Parker Hannifin said it plans to finance the acquisition with new debt. The $14.5 billion company currently has long-term debt of about $4.3 billion.
Tom Williams, Parker Hannifin’s chairman and CEO, said the LORD deal would be accretive to EBITDA margins, cash flow, and earnings per share.
He said Parker Hannifin expects to capture about $125 million in pre-tax, run-rate cost synergies by the end of 2023, though the cumulative cost to achieve those synergies would be about $80 million.
The company said previous dividend payout targets of 30% to 35% of net income over a five-year period would be unaffected by the acquisition.
Parker Hannifin shares were up about half a percentage point by Monday afternoon. After trading below $150 per share earlier this year, the company’s stock has risen about 20% in 2019.
“This strategic transaction will reinforce our stated objective to invest in attractive margin, growth businesses, such as engineered materials, that accelerates us towards top-quartile financial performance,” said Williams.
Lord Chief Executive Officer Ed Auslander said the combination “enables LORD to carry out [its] grander vision. Parker is already a large tier-one supplier in many areas, allowing our business lines immediate access to growth, additional markets, applications, and new customers.”
Lord has 3,100 employees across 17 manufacturing and 15 research and development facilities globally. On the deal’s losing, which is expected to take four to six months, Lord will be combined with Parker Hannifin’s engineered materials group.
The deal has been approved by each company’s board of directors.