Spirax-Sarco Engineering plc (Cheltenham, U.K.; www.spiraxsarcoengineering.com) signed an agreement to acquire Chromalox, Inc. (Pittsburgh, Pa.; www.chromalox.com) from Irving Place Capital for a cash-free, debt-free consideration of $415 million (£319 million).
Chromalox is a well-established provider of electrical products, systems and solutions for industrial process heating and temperature management that we have been following since 2008. It serves a broad range of end markets with approximately 70% of sales being addressed via its direct salesforce, with the remainder going through distributors. Around two thirds of its sales are recurring revenue. It has five manufacturing facilities; three in North America, one in France and one in China. Chromalox is led by a strong, long-serving executive team who will remain with the business post acquisition.
Chromalox is closely related to the Spirax Sarco Steam Specialties business in delivering thermal energy management solutions to its customers through a primarily direct sales channel. Chromalox is also highly complementary to the Steam Specialties business, with the decision between using steam or electricity as a heating medium being driven by differing needs of the application or customer circumstances. As a result, Chromalox will expand our total addressable market by £2.1 billion to £7.9 billion. It will form part of the Spirax Sarco business group and be reported as a separate segment within that business.
In the year ended 30th September 2016, Chromalox recorded revenues of $201 million (£155 million), EBITDA of $43 million (£33 million) and EBIT of $37 million (£28 million). In 2016, 78% of the company’s revenues were in North America with 11% in Europe and 11% in Asia Pacific. As of September 30, 2016, Chromalox’s gross assets were $185 million (£142 million).
Completion is subject to regulatory approval of the transaction by the merger control authority in the USA. These conditions are expected to be satisfied during the current quarter.
Nicholas Anderson, Chief Executive of Spirax-Sarco Engineering plc, said: “We are delighted to bring Chromalox, its management and employees into the Spirax Sarco family. We have been following Chromalox for a number of years and believe that the acquisition represents an excellent opportunity to expand our addressable markets through the purchase of a clearly related business, which solves customers’ specialist heating requirements, and that shares our strong direct sales business model. As we invest in strengthening the company’s direct sales and leverage Spirax Sarco’s global footprint and expertise, Chromalox will enhance our growth and provide sustainable value creation for customers and shareholders.”