Emerson Electric Co. (EMR) has agreed to buy an India-based private company Virgo Valves to strengthen its Process Management division’s presence in the high potential oil & gas industry. The financial terms of the deal remain undisclosed, but the deal is expected to close by early October.
Based in Pune, India, Virgo Valves and Controls is a leading manufacturer of ball valves and automation systems. The company primarily focuses on the manufacture and sales of engineered on-off valve products and has its manufacturing locations across Europe, U.S. and India. Approximately 80% of its revenues come from outside India. In fiscal 2012, the company generated revenues of $250 million. The company primarily caters to the oil & gas, power and mining industries.
Emerson intends to integrate Virgo Valves into its Process Management division as it perfectly complements the division’s existing line of Emerson’s Fisher control valve business. Further, the ‘customer first’ business strategy of Virgo Valves that focuses on exceeding customer expectations in innovation, quality, performance and on-time delivery is also in line with that of Emerson’s solutions.
The Process Management division of Emerson provides products and technology as well as engineering and project management services for precision measurement, control, and monitoring and asset optimization services across industries. In fiscal 2012, the segment contributed 28.9% of the total revenue (highest across the company segments). In the latest reported quarter, the company reported 3% increase in sales driven by strong performance in the energy and chemical end markets. Recently, the Process Management segment received orders worth approximately 38 million from Sasol Ltd. (SSL) and from Premier Oil to automate a new offshore production platform.
With complementing business line, geographic synergies and perfect alignment of business strategy, the acquisition of Virgo Valves is expected to be incremental to Emerson’s Process Management revenues, probably within the first year itself.
Emerson currently carries a Zacks Rank #3 (Hold). Other stocks in the industry that look promising at the moment are Plug Power Inc. (PLUG) and AO Smith Corp (AOS). Both carry a Zacks Rank #2 (Buy).
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