Parker Hannifin buying Clarcor for about $4.03 billion

Parker Hannifin buying Clarcor for about $4.03 billion

Parker-Hannifin making its biggest acquisition ever, moving to expand a portfolio of industrial filters by agreeing to acquire Clarcor Inc. for about $4.3 billion including debt.

Pursuant to the deal, CLARCOR stockholders will receive $83.00 in cash for each share owned.

Clarcor's strong presence in the United States and high percentage of recurring after-market sales would benefit Parker-Hannifin, the company's Chief Executive Tom Williams said in a statement.

CLARCOR Inc. provides filtration products, filtration systems and services, and consumer and industrial packaging products. It has annual sales of about $1.4 billion and 6,000 employees worldwide.

Parker climbed 3 percent to $143.03 at noon in NY.

"Parker-Hannifin's net leverage may approach 2.5 times pro forma for Clarcor", Joel Levington, an analyst at Bloomberg Intelligence, said.

Clarcor Corp.'s stock jumped 16 percent in Thursday premarket trading. The Company's segments include Engine/Mobile Filtration and Industrial/Environmental Filtration.

"We also believe our cultures and values are an excellent match", Williams said. "Together, Parker and CLARCOR will advance our commitment to engineer the success of our customers and team members and enhance shareholder value".

Parker expects to realize annual cost synergies of about $140 million three years after closing, in part through the consolidation of the companies' supply chains.

- After the one-time transaction costs, the deal is expected to contribute to Parker's cash flow, profits and EBITDA margins (earnings before earnings before interest, tax, depreciation and amortization).

Parker plans to finance the transaction using cash and new debt. In addition, this transaction strengthens Parker's systems capabilities and enhances the rest of Parker's technologies, enabling the company to provide even better motion and control systems solutions to customers.

- Parker expects to take advantage of the two companies' complementary filtration technologies, products, markets, and geographic areas to further accelerate growth.

S&P Global Ratings cut its outlook on Parker to negative from stable and said it might lower the company's credit rating "if weaker-than-expected operating conditions, unexpected integration issues, or more aggressive financial policies limit its ability to improve its elevated credit measures relative to our expectations". Parker intends to make debt reduction a priority in the near term. Morgan Stanley, Jones Day, Thompson Hine, Goldman Sachs, Bass, Berry & Sims and Baker & McKenzie are advising the companies on the deal.