Fortive Announces Agreement to Combine Automation and Specialty Businesses with Altra Industrial Motion Corp.
EVERETT, Wash. - Fortive Corporation (“Fortive”) (NYSE: FTV) today announced that it has entered into a definitive agreement to combine four operating companies from its Automation & Specialty platform (“A&S platform”) with Altra Industrial Motion Corp (“Altra”) (NASDAQ: AIMC) in a tax-efficient transaction, creating a pure-play, global leader in the power transmission and motion control market. Total consideration to Fortive and its shareholders is approximately $3.0 billion, including $1.4 billion in cash proceeds and debt reduction for Fortive and 35 million newly issued Altra common shares to Fortive’s shareholders, valued at approximately $1.6 billion based on the 20-day volume weighted average stock price of Altra shares.
“We have great respect for the Altra team and their commitment to continuous improvement and customer satisfaction. This combination of powerful brands and remarkable people creates an organization well-positioned to capture robust Industry 4.0 growth opportunities”
James A. Lico, President and Chief Executive Officer of Fortive, stated, “We are excited about today’s announcement as it represents a major step forward in our portfolio enhancement work towards increasing our focus on software and service exposure, while adding significantly to our M&A capacity. This business combination represents significant value creation for both Fortive and Altra shareholders, customers and employees.
“We have great respect for the Altra team and their commitment to continuous improvement and customer satisfaction. This combination of powerful brands and remarkable people creates an organization well-positioned to capture robust Industry 4.0 growth opportunities,” said Mr. Lico.
Carl Christenson, Chairman and CEO of Altra, stated, "This transaction transforms Altra and represents a major milestone towards accelerating our acquisition strategy. The addition of the A&S platform bolsters our ability to compete effectively on a larger and more global scale in the broader automation space, to further our continuous improvement journey, and to optimize our portfolio in an expanded acquisition universe."
The A&S platform business includes the market-leading brands of Kollmorgen, Thomson, Portescap and Jacobs Vehicle Systems. The A&S platform generated approximately $907 million in revenue for its fiscal year ended December 2017.
The combination will be effected as a Reverse Morris Trust, which is expected to be tax-efficient to Fortive. Fortive shareholders will receive shares representing approximately 54.4% of the issued and outstanding shares of Altra after giving effect to the transaction and valued at approximately $1.6 billion. In addition, Fortive will directly receive added consideration of $1.4 billion through a combination of cash proceeds and debt reduction.
Until closing, which is expected to occur by the end of 2018, the A&S platform businesses will operate within the Industrial Technology segment of Fortive, and financial results will be reported in continuing operations.
Fortive will have the right to designate one member of Altra’s board of directors, expected to initially be Patrick J. Murphy, Senior Vice President of Fortive.
The combined revenue of Altra and the four A&S businesses on a trailing 12 months basis was approximately $1.8 billion, making it a leading pure-play in power transmission and motion control.
Under the terms of the definitive transaction agreements, Fortive will create a wholly-owned subsidiary to hold the A&S platform (the “A&S subsidiary”) and will distribute ownership of that A&S subsidiary to Fortive shareholders in either a split-off or spin-off transaction, which will be followed by a merger of the A&S subsidiary with a subsidiary of Altra. The A&S subsidiary will become a wholly owned subsidiary of Altra. If Fortive elects a split-off, its shareholders would have the opportunity to exchange their shares for the shares of the A&S subsidiary. If Fortive elects a spin-off, the shares of the A&S subsidiary will be distributed to all of its shareholders on a pro rata basis. Fortive will determine which approach it will take prior to closing the transaction.
In a split-off, Fortive expects the dilution impact to its net earnings per diluted share would be approximately 8-9% on an annual basis as a result of the distribution, which will likely be more than offset by the significant increase in M&A capacity.
The transaction is expected to close by the end of 2018, subject to customary closing conditions, including receipt of certain regulatory approvals, Altra shareholder approval and the receipt by Fortive of confirmation of the tax treatment of certain matters.
UBS Investment Bank served as financial advisor to Fortive and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to Fortive.
Fortive and Altra will hold a joint conference call today at 8:30 a.m. ET. The call and an accompanying slide presentation will be webcast on the “Investors” section of the website, www.fortive.com, under “Events & Presentations.” A replay of the webcast will be available at the same location shortly after the conclusion of the presentation.
The conference call can be accessed by dialing (866) 610-1072 (toll-free domestic) or (973) 935-2840 (international); Conference ID: 9088998. A replay of the call will be available for 7 days via telephone starting approximately two hours after the call ends. The replay can be accessed at (800) 585-8367 (toll-free domestic) or (404) 537-3406 (international); Conference ID: 9088998.
Fortive is a diversified industrial growth company comprised of Professional Instrumentation and Industrial Technologies businesses that are recognized leaders in attractive markets. With 2017 revenues of $6.7 billion, Fortive’s well-known brands hold leading positions in field instrumentation, transportation, sensing, product realization, automation and specialty, and franchise distribution. Fortive is headquartered in Everett, Washington and employs a team of more than 26,000 research and development, manufacturing, sales, distribution, service and administrative employees in more than 50 countries around the world. With a culture rooted in continuous improvement, the core of our company’s operating model is the Fortive Business System. For more information please visit: www.fortive.com.