Sweden's SKF to Acquire Kaydon Corporation for $1.25 Billion

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--SKF AB (Gothenburg, Sweden) offered to acquire Kaydon Corporation (NYSE:KDN) (Ann Arbor, Michigan) for $1.25 billion to expand its U.S. operations. According to a company statement, the deal is expected to close during the fourth quarter of 2013. Through this acquisition, SKF AB, a provider of rolling bearings, seals and lubrication systems, will strengthen its position as a global industry leader.

The company aims to achieve annual cost synergies of $30 million and boost revenues by $50 million per year "over the next several years," particularly by selling Kaydon's products through SKF's distribution system.

Kaydon, which makes industrial shock absorbers, gas springs and vibration isolation systems, generates 62% of its sales in North America. In 2012, Kaydon had sales of $475 million and more than 2,100 employees. "Our board believes that the proposed transaction represents a compelling value for our shareholders," Kaydon's Chairman and CEO James O'Leary said in a statement. "We believe that this transaction represents an excellent strategic fit for Kaydon."

SKF, which has more than 46,000 employees across 130 countries, opened its second U.S.-based solution factory in Cleveland last year. In a statement, Tom Johnstone, SKF President and CEO, said: "The complementary nature of their products and technologies, their geographical and customer presence, and their manufacturing footprint will enable us to even better serve our customers and distributors in the industrial market worldwide."

"We believe that the acquisition of Kaydon Corporation will strengthen SKF's market position in North America and will improve SKF's product offering," said Eve Seiltgens, a credit analyst at Standard and Poor's, based in Frankfurt, Germany. "This would slightly benefit SKF's business profile." S&P placed an "A-" on SKF, with a negative outlook on acquisition.

SKF is a barometer for the health of global industrial orders, because its products are used by customers in construction, automotive and aviation manufacturing, as well as energy and mining. About 6.7% of SKF's assets, including factories and production facilities, are based in Sweden, compared with 28% in North America and 41% throughout Europe.

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