PROVIDENCE – Textron Inc. (NYSE: TXT) today announced it has reached a “definitive agreement” to sell its Textron Fluid & Power group to U.K.-based Clyde Blowers Ltd. for up to $645 million in cash and debt.
Fluid & Power – a member of Textron’s Industrial segment, which saw its segment profit dip to $58 million in the second quarter from $59 million a year earlier, despite revenue that grew 15.6 percent to $1.015 billion (READ MORE) – serves the utility, nuclear, oil, gas, water, petrochemical, mining, marine, defense, construction, paper, metals and food processing industries, among others.
Prospective buyer Clyde Blowers is a leader in the power, materials-handling, pump technology, logistics and intermodal transport industries. It employs about 2,500 people in 21 nations, through a portfolio of 42 companies with a combined annual revenue of more than $1.4 billion.
The U.K. company would assume about $41 million in employee-benefit liabilities and pay Textron about $526 million in cash plus a six-year note with a face value of $28 million, for a total of $595 million. It also might pay up to $50 million more – “primarily payable in a six-year note” – contingent on operating results for all of 2008, Textron said. Company projections call for the Fluid & Power group to post 2008 full-year revenue of $675 million.
The transaction would mark Textron’s exit from the pump and power-transmission industries, the company said. Included would be all four Fluid & Power product lines – Gear Technologies, Hydraulics, Maag Pump Systems and Union Pump – as well as each of their respective brands.
“This is a very positive move for both parties, as well as a great fit for our employees,” Lewis B. Campbell, Textron’s chairman, president and CEO, said in a statement this morning.
“Clyde Blowers is gaining world-class operations with Textron’s Fluid & Power group of companies – including some of the most advanced technologies, respected brands and highly talented people in their respective industries – while we continue to strategically focus our portfolio of businesses to deliver even more meaningful value growth, profitability and shareholder return.”
The deal is expected to close by year’s end, pending the completion of buyer financing, regulatory review and approval and other customary closing conditions.
After-tax cash proceeds would amount to about $350 million, Textron said. The company expects to apply about half those proceeds to its common-stock buyback program. “This will be in addition to the company’s previously announced plan to purchase up to $500 million in common shares,” the company said. “In total then, Textron expects to repurchase about $675 million of its shares over the next several quarters.”
The combined impact of the Fluid & Power sale and the share repurchases “is expected to be approximately neutral to 2009 earnings per share,” Textron added.
Textron Inc. (NYSE: TXT) is a $13.2 billion company employing 44,000 people in 34 countries. Its brands include Bell Helicopter, Cessna Aircraft Co., Jacobsen, Kautex, Lycoming, E-Z-GO and Greenlee, among others. Additional information is available at www.textron.com. Information about Clyde Blowers Ltd. is available at www.clydeblowers.co.uk.
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