Colfax Corporation (CFX) announced an increase in its common share offering to the public from 6.5 million to 8 million. This, along with the Victor acquisition news and BDT investors opting for preferred shares’ conversion into equity shares, drove the company’s share price higher. At the end of trading on Feb 13, shares of Colfax gained 7.2% over its previous day’s closing price.
Colfax has priced each of its common shares under the offering at $68.75. Also, the underwriters have been given an option to purchase an additional 1.2 million shares (up from 0.975 million shares offered previously) from Colfax. The proceeds from this offering, together with cash and borrowings, will be utilized to fund the Victor acquisition.
The company, on Feb 12, made an announcement to acquire Irving Place Capital’s Victor Technologies Holdings, Inc. The acquisition agreement between Colfax and Irving Place Capital has been valued at $947.3 million, including assumption of debt. Victor Technologies Holdings is a renowned manufacturer of advanced cutting, gas control and specialty welding solutions.
Victor Technologies Holdings will complement Colfax’s ESAB business and will help its expansion in new markets and applications. Product brands associated with Victor Technologies Holdings include Victor, Tweco, Cigweld and Stoody. In addition to these popular brands, Victor Technologies’ 2,000 associates and a revenue generation capacity of $500 million will benefit Colfax.
Colfax’s management anticipates the transaction to be accretive to its adjusted earnings per share and free cash flow immediately. Completion is subject to customary closing conditions.
Concurrent with the acquisition news, Colfax entered into a conversion agreement with BDT CF Acquisition Vehicle, LLC. BDT investors hold the company’s Series A Perpetual Convertible Preferred Stock. Per the terms of the agreement, BDT investors opted for conversion of roughly 13.9 million preferred shares into 12.2 million common shares of Colfax.
In lieu of the dividend Colfax would have paid on preferred shares to the investors through Jan 2015, it will pay $23.4 million to BDT investors.
In the last 7 days, the Zacks Consensus Estimate has remained stable at $2.61 for 2014, while beincreasing 2.6% to $3.13 for 2015. These estimate represents year-over-year growth of 27.9% for 2014 and 19.8% for 2015.
Colfax currently has a market capitalization of $7.1 billion and holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Altra Industrial Motion Corp. (AIMC), Barnes Group Inc. (B) and The Middleby Corporation (MIDD), all of which carry a Zacks Rank #2 (Buy).
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