Crane Continues to pursue Circor

Crane Co. said Circor International Inc. had rejected its takeover offer of $1.7 billion, forcing it to air its proposal publicly to shareholders in the hopes of cajoling the board into negotiations. Circor, which makes valves, gauges and other industrial parts, said the $45-a-share all-cash bid was opportunistic and undervalued the company. Circor shareholders may disagree with that contention, seeing as the stock has been trending generally downward for much of the past five years and closed at just above $30 before Crane publicized its latest offer. As a testament to this, Mario Gabelli, whose firm Gamco Investors Inc. is one of Circor’s biggest holders and also a Crane investor, called in to Crane’s conference call on the proposal and said a deal would be “good for both companies.” He also pointed out that Circor, which received Crane’s bid on April 30, held its annual meeting a week later and failed to mention the offer as shareholders re-elected two directors on the staggered board. Gamco later said it would seek candidates for possible nomination to Circor’s board and explore ways to improve corporate governance.

Stifel Financial Corp. analyst Nathan Jones raised the specter of ITT Inc. or Flowserve Corp. making a competing offer for Circor. But this is the third time in eight years that Crane has tried to buy Circor, so it would appear the company wants this deal badly. Also, the implied forward EBITDA multiple of nearly 14 times is already quite rich, particularly if you think the economy is slowing down.

Xylem CEO Decker also signaled he would hold off on large M&A for the time being, saying a deal on the scale of the company’s $1.7 billion takeover of Sensus USA Inc. in 2016 likely wouldn’t happen until 2020. But there are 12 small startups in Xylem’s deal pipeline and the company is focusing on targets with a digital bent, as well as the industrial water services and treatment sectors. Roper Technologies Inc. CEO Neil Hunn said he’s not opposed to divestitures of the company’s legacy industrial businesses, but given the high quality of those assets, he would need a “screaming” price to justify paying the associated taxes and putting shareholders through the risks of a sale process.