Metso Corp. (Finland) this week sold its Process Automation Systems business to Valmet (Finland). The enterprise value of the acquisition is EUR 340 million. It will be financed with committed long-term financing, and is estimated to be completed by April 1. The completion of the transaction is subject to approval by the competition authorities.

 

The acquired operations supply process automation and information management systems and related applications and services to the pulp, paper, energy, and other process industries. The purchased operations employ about 1,600 people. Net sales for 2013 amounted to approximately EUR 300 million.

 

As a result of the acquisition, Valmet will become a stronger and unique technology and services company in its field, with a full automation offering. The acquisition strengthens Valmet's competitiveness by combining paper, pulp, and power plant technology offering, services, process know-how, and automation into one customer value-adding entity. Approximately 80% of Process Automation Systems sales comes from Valmet's current customer industries and the rest from other process industry clients.

 

The business being acquired has well established customer relations and a high level of technology and know-how. About 1,600 automation professionals work close to customers at approximately 80 locations around the world. The share of services business in the acquired business is significant, accounting for approximately 45% of net sales in 2013, and is based on large installed automation base and a captive business model. The acquired business has a good financial track record and stable cash flow.

 

Of the Process Automation Systems business net sales of approximately EUR 300 million, Valmet has accounted for approximately 10%. Therefore, the acquisition increases the share of stable high-margin business of Valmet's net sales by approximately EUR 270 million.

 

Process Automation Systems has a solid financial track record, with slight growth and relatively stable margins during the past 10 years. EBITA margin (earnings before interest, taxes, and amortization) for Process Automation Systems has been approximately 10%-12%.

 

Through the acquisition, Valmet strengthens its offering and continues to develop its business. Significant cost synergies are not expected to be achieved.

 

Valmet's balance sheet remains strong also after the acquisition. To illustrate, if the acquisition had taken place at the end of September 2014, Valmet's gearing after the acquisition would have been be approximately 23% and equity ratio approximately 35%, based on illustrative figures of the acquired business at the end of September 2014.

 

"Through the acquisition of Process Automation Systems, Valmet will become a technology and service company with full automation offering. The acquisition will help Valmet in increasing its business stability, while also improving profitability. By combining paper, pulp, and energy technology, process know-how, services, and automation, we can serve our customers even better than before and move our customers' performance forward. idhis transaction has an excellent fit with our existing strategy and the timing is right for Valmet," says Pasi Laine, president and CEO of Valmet.