Hillenbrand to buy K-Tron for about $426 million

BANGALORE (Reuters) - Funeral products maker Hillenbrand Inc (HI.N) said it agreed to acquire K-Tron International Inc KTII.O, a maker of manufacturing process equipment, for $150 a share in cash.

The deal worth about $426 million, based on 2.84 million K-Tron shares outstanding as of October 30, represents a premium of 32.1 percent to K-Tron's closing price of $113.52 Friday.

"(The deal) will reduce Hillenbrand's total reliance on funeral service and provide greater opportunities for revenue and earnings growth," Hillenbrand Chief Executive Kenneth Camp said on a call with analysts.

K-Tron's business lines offer a number of pathways for additional organic revenue growth, both in existing markets and in potential new markets and geographies, he added.

K-Tron, which is highly diversified in terms of customers, geographies and end markets, sells its products primarily into nine diverse industries, with 35 percent of its sales coming from outside the United States.

"Although K-Tron's products differ from ours, we are both manufacturing companies that share similar processes and core operational values," CEO Camp said.

"K-Tron also has a healthy balance sheet and strong cash position that, when combined with a significant financial resource of Hillenbrand, will allow us to continue to pursue profitable growth opportunities."

DEAL TO BOOST EARNINGS

Batesville, Indiana-based Hillenbrand, which expects to use cash on hand and proceeds from debt financing to fund the acquisition, said it sees the deal adding to its earnings in 2010, net of acquisition costs.

The company expects to pay down the acquisition-related debt "rapidly," utilizing the cash flow that both Batesville and K-Tron expected to generate, Chief Financial Officer Cynthia Lucchese said on the call.

Standard & Poor's said its debt rating on Hillenbrand remains unaffected by the deal, but Moody's said it was placing its rating under review for a possible downgrade.

Hillenbrand, the holding company for Batesville Casket Co, also expects to close the deal by the end of March, after which K-Tron, which produces materials handling equipment and systems, will operate as a wholly owned subsidiary.

Pitman, New Jersey-based K-Tron has been lowering its costs through job cuts and pay freezes through most of last year and saw its stock climb from a year-low of $45.70 in March to a year high of $115.05 last week.

Hillenbrand's financial adviser in the deal is P&M Corporate Finance LLC. Goldman Sachs is serving as financial adviser to K-Tron.

Shares of K-Tron were up 31 percent at $148.26 in afternoon trade on Nasdaq, while Hillenbrand shares were down 3 percent at $18.90 on the New York Stock Exchange.

(Reporting by Renju Jose; Editing by Anthony Kurian and Gopakumar Warrier)