Thermon Group Holdings, Inc. THR recently announced the acquisition of Sumac Fabrication Co. Ltd. The transaction, involving Thermon Group’s indirect subsidiary, Thermon Canada, Inc., was completed in two stages.
As disclosed, Thermon Canada acquired controlling interest (75% stake) in Thermon Power Solutions, Inc., effective Apr 1. The transaction was valued at approximately $11.4 million, paid fully in cash. In addition, there is a provision for $6 million of cash payment, contingent upon the acquired assets’ earnings before interest, tax, depreciation and amortization (“EBITDA”) performance over the next 12 months. Remaining 25% interest in Thermon Power Solution has been retained by an entity related to the President of Sumac.
Moreover, effective Apr 1, Thermon Power Solutions acquired businesses of Sumac Fabrication Co. Ltd. The latter is a well-known designer and fabricator of temporary power distribution equipment used in industrial markets. This buyout will enable Thermon Group to expand its product portfolio and penetrate deeper into global industrial markets. Sumac generated revenues of approximately $14 million in fiscal 2014 (ended Sep 30, 2014).
The acquisition of Sumac is in sync with Thermon Group’s strategic business expansion policy, involving both organic and inorganic means. It is also indicative of the company’s strong balance sheet and healthy cash position.
The Zacks Consensus Estimate for Thermon Group is currently pegged at $1.40 for fiscal 2015 and $1.41 for fiscal 2016. These estimates represent year-over-year growth of 16.7% and 1% for fiscal 2015 and 2016, respectively. Also, over the next 5 years, earnings are projected to grow by 15%.
With a market capitalization of $764 million, Thermon Group Holdings presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the machinery industry include ESCO Technologies Inc. ESE, Astec Industries, Inc. ASTE and AO Smith Corp. AOS. All these stocks hold a Zacks Rank #2 (Buy).
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