Dover Corporation’s (DOV) subsidiary Knowles Corporation has filed an initial Form 10 registration statement with the U.S. Securities and Exchange Commission (SEC) regarding its earlier announced decision to spin-off certain part of its communication technologies businesses into a standalone, publicly traded company. This decision of Dover, announced in May, was in order to better concentrate on its core industrial business, which is focused around energy, energy, refrigeration, fluids and printing and identification.
The Form 10 registration statement contains a preliminary information statement providing important information about the spin-off and Knowles. It is an important step in the process of establishing Knowles as an independent, publicly traded company.
Dover’s Communication Technologies segment is engaged in the design and manufacture of innovative products and components which serve the following key markets – Consumer Electronics, Medical Technology, Aerospace & Defense, and Telecom and Others. The businesses to be spun off will be included in the company's Knowles communication tech unit. However, the company will retain businesses in the communications technologies segment that make components for aerospace and defense industries and fluid applications.
Dover acquired Ill.-based Knowles, leading manufacturer of technologically advanced micro-acoustic component products, in 2005 for $750 million. Knowles is also the leading manufacturer of MEMS ("micro electro mechanical systems") microphones for the high end cell phone market. Prominent brands within the new company will include Knowles, Sound Solutions, Dielectric, Novacap, Syfer and Vectron.
The transaction is expected to be in the form of a distribution of 100% of the stock of the new, independent, publicly traded company Knowles. It will be tax-free for Dover and the U.S. shareholders. The transaction is on track and slated to be completed by 2014. Dover will incur onetime cost in the range of $60 to $70 million.
Knowles, on a pro-forma basis for 2013, will have $1.3 billion in annual revenues, with about two-third derived from high-growth acoustic products. Following the spin-off, Dover's total revenue in 2013 on a pro-forma basis is estimated at around $7.4 to $7.6 billion. Dover had generated income of $8.1 billion in 2012.
However, the completion of the transaction is subject to certain customary conditions including other appropriate filings with the U.S. Securities and Exchange Commission as well as final approval by Dover's board of directors.
The communication technologies business was not exactly aligned with the industrial profile of Dover. The divestment will help the company to focus on its key growth areas including energy, refrigeration, fluids and printing and identification. However, Dover will lose its position as the leading supplier of microphones for smartphones. Dover will benefit from acquisitions, growth in bookings and orders, and a positive outlook for the semiconductor market.
Dover currently retains a Zacks Rank #2 (Buy). EnPro Industries, Inc. (NPO), Altra Holdings, Inc. (AIMC) and Graco Inc. (GGG) are other favorable options for investors keen on this industry. EnPro Industries carries a Zacks Rank #1 (Strong Buy), while Altra Holdings and Graco both retain a Zacks Rank #2 (Buy).
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