Standex International Corporation SXI announced that it signed an agreement to acquire Olathe, KS-based Torotel, Inc. The transaction value, fixed at $48 million or $7.77 per share, will be paid out in cash to Torotel’s shareholders.
It is worth noting here that Torotel engages in the manufacturing and distribution of custom magnetics products — including high-voltage transformers, inductors, reactors, electro-mechanical assemblies and others. It primarily serves customers in the defense and aerospace markets. Torotel has operating facilities in Olathe and Hatfield, PA. It generated revenues of $24 million in the trailing 12 months.
Details of Buyout
As noted, the transaction value of $48 million includes debt-assumption of $1.4 million. Also, Torotel’s transaction-related costs of $8 million will be handled by Standex. Notably, Standex will use its revolving credit facility (with an available balance of $257 million at the September-end quarter) to finance the buyout.
Through Torotel’s technical expertise, solid customer base and customized product offerings, the buyout will help strengthen Standex’s magnetics business.
Excluding impacts of transaction and purchase accounting (one-time) costs, Standex expects the Torotel buyout to slightly increase its earnings per share in the first year of buyout completion.
Subject to the fulfillment of regulatory approvals and closing conditions as well as receipt of approvals from Torotel’s shareholders, Standex anticipates completing the buyout in the first quarter of calendar 2020.
Strengthening Portfolio Through Buyouts
We believe that the above-mentioned transaction is consistent with Standex’s policy of acquiring businesses to gain access to new customers, regions and product lines.
In April 2019, the company acquired Genius Solutions Engineering Company as well as its associate GS Innovation, Inc. The buyout has been strengthening Standex’s product offering in the Engraving segment. Also, the company added Regional Mfg. Specialists, Inc to its portfolio in October 2018. The buyout has been strengthening Standex’s magnetic capabilities.
Zacks Rank, Earnings Estimates and Price Performance
Standex, with a market capitalization of nearly $962 million, currently carries a Zacks Rank #2 (Buy). The company anticipates benefiting from an improvement in the performance of the Engraving segment as well as healthy scientific and engineering technologies businesses, and cost-restructuring efforts.
The Zacks Consensus Estimate for Standex’s earnings is pegged at $4.60 for fiscal 2020 (ending June 2020) and $5.40 for fiscal 2021 (ending June 2021), suggesting no change and an increase of 3.8% from the respective 60-day-ago figures.
Standex International Corporation Price and Consensus
Standex International Corporation price-consensus-chart | Standex International Corporation Quote
Shares of Standex have gained 13.6% compared with the industry’s 9.7% growth in the past six months.
Other Stocks to Consider
Some other top-ranked stocks in the industry are Tennant Company TNC, Kaman Corporation KAMN and Dover Corporation DOV. While both Tennant and Kaman currently sport a Zacks Rank #1 (Strong Buy), Dover carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for Tennant and Dover have improved for the current year, while have been unchanged for Kaman. Further, positive earnings surprise for the last reported quarter was 40% for Tennant, 4.58% for Dover and 17.95% for Kaman.
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