Ratos has entered into an agreement to acquire the American filter company Farr for SEK 1.2 bn (USD 134M). The market and company analysis were performed in conjunction with Swedish air filter manufacturer Camfil AB. Concurrently, Camfil has issued Ratos the option of merging Farr's businesses with Camfil´s operations during year 2000.
Ratos has entered into a binding agreement to acquire the American filter company Farr. The acquisition will be made through a newly created American subsidiary.
Should Ratos decide to exercise the option of merging Farr's activities into Camfil, the resulting company would represent one of the world's most recognized providers of clean air solutions. Ratos' ownership of the new company could amount to approximately 20%.
Farr Positive toward Merger
Farr, a NASDAQ listed company, had revenues of USD 117M and pre-tax earnings of approximately USD 11M for fiscal year 1999. Ratos' offer of USD 17.45 per share represents a premium of 47% above Farr's closing share price of USD 11.87 on Friday, March 24, 2000. Ratos invests SEK 250M (USD 29M) in equity in the bidcompany.
The board of directors of Farr has unanimously approved the transaction and resolved to recommend that Farr shareholders accept the offer.
An Acquisition with Many Opportunities
Farr manufactures and distributes a broad range of air filtration products. Approximately 90% of the company's
sales are within North America, while more than 80% of Camfil's sales are on the European continent. A merger between these companies would offer significant opportunities to capitalize on complementary product lines and distribution networks.
Jan Eric Larson, President & CEO of the Camfil Group commented that, "Based on the analysis we performed with Ratos, we anticipate the opportunity for significant growth in revenue and earnings through a merger between Farr and Camfil.
A merger with Farr would make Camfil one of the industry's few global players. The combined companies estimated annual turnover would exceed SEK 2.5 bn (~ USD 300M) in year 2000. Manufacturing would occur in 20 facilities located in 9 different countries. The Group would be represented in more than 50 countries across the globe.
"Both companies focus on supplying clean air to protect the well-being of people, the environment and sensitive production processes. We view the opportunities for cooperation between the two companies as extremely attractive and will continue to evaluate the potential for such an arrangement", says Bo Jungner, Senior Investment Manager of Ratos.
A Growing Market for Air Filters
The market for air filters is steadily increasing. The increase in demand is based on a greater awareness of Indoor Air Quality (IAQ) and more stringent requirements in numerous manufacturing processes. Producers of electronic components, pharmaceutical products and food & beverage products all have strict air cleanliness requirements for their processes. A prevailing trend also demonstrates that the number of people in need of better air filtration is increasing dramatically throughout the industrialized world. Market researchers estimate that the global air filtration market exceeds SEK 25 bn (USD 3 bn) with North America and Europe representing almost 75% of the total.
"We anticipate significant changes within this industry over the coming years. Ratos and Camfil can participate in these changes to benefit both customers and shareholders. This transaction fits perfectly into Ratos' strategy", says Bo Jungner.
A Global, Family-Owned Swedish Company
Camfil, headquartered in Trosa, Sweden, was founded in 1963 by the current owner/family in a joint venture with Cambridge Filter Corporation, USA. In 1983, the family bought-out Cambridge Filter and has since been the sole owners of Camfil. Through high quality product offerings, technological leadership and a clear focus on clean air, Camfil has grown to become the leading air filter manufacturer in Europe with a turnover of SEK 1.5 bn (~ USD175M) and a pre-tax profit of SEK 90M (~ USD 10M).
"With the small town Trosa as our headquarters, we've grown both organically and through acquisitions and have created one of the world's leading producers of air filters", says Camfil's Jan Eric Larson.
"Ratos' competence and financial resources coupled with Camfil's experience and industry knowledge provide a superb combination to help fulfill our future strategy," says Jan Eric Larson.