Columbus McKinnon Corp., moving to bolster its overseas business, has purchased a German hoist and material handling equipment manufacturer in a $53 million deal.
The deal to acquire Pfaff Beteiligungs GmbH from the EQT Opportunity Fund is expected to immediately add to Columbus McKinnon's profits, although the increase is likely to be less than 10 cents per share, said Timothy T. Tevens, the company's president and chief executive officer.
Pfaff had about $90 million in sales during 2007, and even though a significant portion of those revenues are in markets where Columbus McKinnon already competes, Tevens said he is confident that the company will be able to maintain Pfaff's revenues at that level going forward.
Columbus McKinnon has been seeking acquisitions for more than a year that would expand its product offerings and bolster its international presence, with the goal of increasing the company's international sales from a almost third of total revenues to about half.
The Pfaff deal, the first that the company has completed from its search for bolt-on acquisitions, will boost Columbus McKinnon's international sales to about 40 percent of the company's total revenues. The acquisition also will put the company about half way towards reaching its goal of adding $100 million to $200 million in international sales through acquisitions, Tevens said.
"This is a great acquisition for Columbus McKinnon," Tevens said.
While Pfaff is profitable, Tevens said its operating profit margins are in the "mid-to-high single-digit" range, which is less than Columbus McKinnon's 13 percent margin.
"It's accretive. It's just not hugely accretive," Tevens said during a conference call Thursday.
As a result, Tevens said he expects to produce some cost savings by making some Pfaff products at Columbus McKinnon's existing plants in the United States and China, as well as by consolidating some back-office and administrative functions.
"It's going to take some time. It's not months, but years," to bring Pfaff's operating margins up to Columbus McKinnon's levels, said Karen Howard, the company's vice president of finance and chief financial officer.
Columbus McKinnon, whose long-term goal is to reach $1 billion in sales, paid for the acquisition with cash, leaving the company with more than $25 million in cash still on its books and access to an untapped $75 million line of credit from its lenders.
Pfaff has virtually no U.S. sales, but the purchase gives Columbus McKinnon a foothold in the European actuator market that it had tried unsuccessfully to enter through its Charlotte, N.C.-based Duff-Norton subsidiary, Tevens said. That European actuator business accounts for about 40 percent of Pfaff's sales.
The remaining portions of Pfaff's business come from lifting materials equipment, which overlap some of Columbus McKinnon's existing markets. But Tevens said the two businesses use different sales methods, with Pfaff relying on its own sales force and Columbus McKinnon depending on distributors.
Tevens said the deal will give Columbus McKinnon some opportunities to cross-sell some Pfaff and Columbus McKinnon products.