Editor's note: Story has been updated
EnPro Industries said it has entered into a definitive agreement to sell its Fairbanks Morse division to an affiliate of funds managed by private equity firm Arcline Investment Management for US$450 million.
The deal, subject to potential adjustment at closing, reflects a multiple of approximately 10.5 times expected 2019 adjusted EBITDA for Fairbanks Morse.
“This transaction is a significant milestone in the continued evolution of our portfolio,” said Marvin Riley, chief executive officer of EnPro. “Fairbanks Morse, which constituted our Power Systems segment, is a premier provider of large, complex power systems, primarily serving the U.S. military. After thoughtful consideration we determined that Fairbanks Morse would be better able to achieve its goals in an alternative setting. This transaction bolsters our already strong balance sheet and improves our flexibility to deploy capital towards businesses with characteristics that are more similar to EnPro’s core businesses.
“I would like to thank the Fairbanks Morse team for their hard work and dedication that has put the business on a clear growth trajectory. We were able to monetize this momentum through a sale to Arcline, and we are confident they will continue this strong growth trend,” Riley said.
Arcline is a private equity firm with US$1.5 billion in committed capital that invests in “niche, market-leading companies that we feel passionate about owning,” according to its website. The company was founded in 2018.
In a release, Arcline said it is “proud to invest in a company that is critcal to our national interests. Our intent is to build upon and grow Fairbanks Mores’s 120+year reputation of dependeability, reliability and innovation in serving its long-standing customers.”
Earlier in 2019, Arcline agreed to acquire Baker Hughes’ reciprocating comprehension division, which makes and services industrial engines and compressors built into natural gas pipelines operated by oil and gas companies. The company has wide-ranging holdings: Arcline also acquired a majority interest in Akron Biotechnology, a supplier of cGMP-compliant products and services critical for the production of advanced therapy medicinal products, including cell therapies, gene therapies and engineered tissues.
With a history spanning more than 125 years, Fairbanks Morse offers distributed power generation solutions in a wide range of applications, from base load and standby in municipal, nuclear, and institutional facilities to locomotive engines, and naval and commercial-class ship propulsion and shipboard power.
The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close by March 31, 2020. EnPro’s Power Systems segment will be classified as a discontinued operation for the fourth quarter and full year 2019, and all prior quarterly and annual financial results of EnPro will be recast to reflect Fairbanks Morse as a discontinued operation, consistent with accounting requirements.