Flowserve said the deal is expected to be accretive to its adjusted earnings per share in the first full year following closing, which is expected in the fourth quarter. (Source: Shutterstock)
Infrastructure service company Flowserve Corp. has signed a definitive agreement to acquire privately held MOGAS Industries for at least $290 million.
Under the terms of the deal, MOGAS has the potential for an additional $15 million earnout payment tied to certain minimum levels of adjusted EBITDA for the calendar year ending Dec. 31, 2024. Adjusted for approximately $15 million of expected tax benefits, Flowserve said the upfront purchase price represents a purchase multiple of approximately 7.5x MOGAS’ 2024E adjusted EBITDA.
The deal is the latest movement toward service company consolidation both of varying sizes.
In late July, Helmerich & Payne said the company would buy the U.K.’s KCA Deutag in an $1.97 billion acquisition. On June 10, Noble Corp. said it would buy Diamond Offshore Drilling for $1.6 billion. Earlier this year, SLB’s agreed to pay nearly $8 billion to acquire ChampionX. SLB also said it would buy Aker Carbon Capture for $380 million.
Flowserve said the deal is expected to be accretive to its adjusted earnings per share in the first full year following closing, which is expected in the fourth quarter. MOGAS expects to contribute revenues of approximately $200 million with adjusted EBITDA margins in the high teens, according to an Aug. 13 press release.
Flowserve said the additional scale, footprint consolidation and procurement opportunities provided by the combination provide “clear visibility to at least $15 million of run-rate cost synergies within two years after closing of the transaction.”
The transaction is expected to increase Flowserve’s aftermarket potential and provide opportunity for revenue growth synergies as well, the company said.
Flowserve expects to fund the upfront cash consideration through a combination of cash and available debt financing. The transaction is subject to the satisfaction of customary closing conditions and regulatory approvals.
“MOGAS is highly complementary to Flowserve’s current valve portfolio and further advances our 3D growth strategy by roughly doubling our direct mining and mineral extraction exposure and driving further diversification. The combination creates technically differentiated scale in severe service flow control with significant aftermarket contribution,” said Scott Rowe, Flowserve’s president and CEO. “This acquisition meets our disciplined financial criteria and positions us to enhance value for all our shareholders, customers and associates.”
In July, Houston-based MOGAS received a contract with Aramco for the first commercialization of Thermal Crude to Chemicals technology at South Korean refiner S-Oil's Shaheen project. The contract is the biggest investment for the Saudi Arabian company in South Korea.
MOGAS' differentiated valve products are expected to enhance Flowserve's installed base, creating meaningful aftermarket opportunities, Flowserve said. MOGAS will be integrated into Flowserve’s Flow Control Division (FCD) segment, building upon Flowserve’s comprehensive valve and automation portfolio with the addition of MOGAS’ “strong brand, heritage and technical expertise in diverse and attractive end markets.”
Flowserve said it anticipates customers of both companies will significantly benefit from the newly combined product portfolios in the growing mining industry.
Founded in 1973, MOGAS was established by V. Louis Mogas with the purchase of a small machine shop. Today, MOGAS is a manufacturer of severe service isolation valves for a variety of end-markets, including mining, power and process industries through its manufacturing facility in Houston.
MOGAS has established sales and service offices in Australia, China, Europe, Canada, South America, the Middle East and India, countries which are “highly complementary” to Flowserve’s served geographies, the company said.
MOGAS president and CEO Matt Mogas said there was no better cultural and strategic fit for the family’s 50-year-old business. “Our employees, who are at the heart of our success, will benefit from the alignment of values and opportunities for growth within a larger organization,” he said.
Jefferies is serving as financial adviser and Baker McKenzie is serving as legal adviser to Flowserve.
Baird is serving as financial adviser and Foley & Lardner is serving as legal adviser to MOGAS.
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