Flowserve to acquire Velan in an all-cash transaction

Flowserve Corporation (“Flowserve”), a leading provider of flow control products and services for the global infrastructure markets, and Velan Inc. (“Velan”), a leading manufacturer of highly engineered industrial valves, today announced that they have entered into a definitive agreement (the “Arrangement Agreement”) under which Flowserve will acquire Velan in an all cash transaction (the “Transaction”) valued at approximately $245 million (C$329 million), including the purchase of all of the issued and outstanding Velan equity for approximately $209 million (C$281 million) and the assumption of approximately $36.3 million (C$48.9 million) in outstanding gross debt as of November 30, 2022.  Flowserve will also assume Velan’s $31.4 million (C$42.2 million) of cash and cash equivalents, also as of November 30, 2022.  The Transaction is expected to close by the end of the second quarter of 2023.

Founded in Montreal in 1950, Velan is a leading manufacturer of industrial valves with a strong presence in the nuclear, cryogenic and defense markets. Velan is a family-controlled business, with a team of 1,650 people and manufacturing facilities in nine countries. Through its fiscal third quarter ended November 30, 2022, Velan reported trailing twelve-month revenues of approximately $380 million with reported EBITDA of approximately $21 million. Upon completion of the Transaction, Velan will become part of Flowserve’s Flow Control Division (FCD) segment.

Velan adds significant value within Flowserve’s existing valves portfolio and further builds upon Flowserve’s existing assets through the addition of Velan’s premier brands, strong heritage and technical expertise in attractive and diverse end markets. The additional scale, footprint consolidation and procurement opportunities provided by the combination is expected to result in substantial synergies. Further, the Transaction is expected to increase Flowserve’s aftermarket potential, based on the large installed base of Velan products and the expansive network of Flowserve’s Quick Response Centers (QRCs.)

In addition to revenue synergies created through a global aftermarket footprint, Flowserve expects to realize approximately $20 million (C$26 million) of run-rate cost synergies within two years after close. The Transaction is expected to be accretive to Flowserve’s adjusted EPS in the first full year following close. Including anticipated synergies, the economics imply an EBITDA multiple of less than 7x. 

Following closing of the Transaction, Flowserve expects to maintain a significant presence in Québec, including Velan’s Montreal, Québec head office and the combined company will continue to maintain a significant global presence.

The Transaction follows the unanimous recommendation of Velan’s Special Committee of the Board of Directors, which reviewed various strategic alternatives available to Velan in order to enhance shareholder value (including status quo and a variety of other stand-alone structures). The Transaction represents the best and highest proposal received by the Special Committee as part of its process.

The Transaction is expected to proceed by way of a plan of arrangement by which Flowserve would acquire all of the issued and outstanding shares of Velan, subject to the satisfaction of customary closing conditions, including applicable court and regulatory approvals and the approval of at least 66⅔% of the votes cast by Velan shareholders represented at a Special Meeting in person or represented by proxy as a single class, and a simple majority of the votes cast by the Velan shareholders, by class, after excluding votes from certain shareholders. The Transaction is not subject to any financing conditions. The Transaction is expected to close by the end of the second quarter of 2023.