* KKR offers $76 per share for Garden Denver
* Offer at a 3 pct premium to Garden Denver's Thursday close
* Analysts say company is worth more
* Shares close at $74.74
March 8 (Reuters) - Industrial machinery maker Gardner Denver Inc agreed to sell itself to private equity firm KKR & Co LP for $3.74 billion but some on Wall Street questioned the valuation, saying the company was worth much more.
Gardner Denver shares closed at $74.74 on the New York Stock Exchange on Friday, well short of KKR's $76 per share bid, indicating investor skepticism over the deal.
Analysts' have an average price target of $78.50 on the stock as of Thursday. Four of the eight analysts tracking the stock have targets above KKR's offer price. Two do not currently have a price target estimate.
The stock's intrinsic value is $85.47, according to Thomson Reuters StarMine data. The model is a measure of a stock's current value when considering analysts' growth estimates for five years, and then modeling the typical growth trajectory over a longer period of time.
Diversified manufacturer SPX Corp had offered to buy Gardner Denver at $85 per share after it put itself up for sale, sources said. SPX abandoned the plans in December after its shareholders questioned the logic of a merger.
"We believe the deal makes a lot of sense for KKR, but we still fail to see how this is the best possible outcome for Gardner Denver," said BB&T Capital Markets analyst Kevin Maczka.
He also questioned the board's willingness to sell the company at this time, given its strong results and robust earnings power.
Gardner Denver, which makes compressors, pumps and vacuum products for industrial uses, reported better-than-expected quarterly results late last month, helped by a restructuring program at its European operations.
The Wayne, Pennsylvania-based company, however, forecast 2013 earnings below expectations, which analysts termed conservative. They have since raised their price targets, saying the company's business was improving.
Robert W. Baird analyst Michael Halloran said the company was worth more than $80 per share and that the $76 valuation is below Gardner Denver's peer group multiples.
He pegged KKR's valuation at roughly 0.5-1.0 times below Garden Denver's current peer group multiples.
KKR, which had originally offered $75 per share, has been in the pole position to buy Gardner Denver after other private equity bidders who initially took part in the auction abandoned the process, sources told Reuters.
Sources have said Gardner Denver considered leveraged recapitalization as an alternative.
"We understand KKR's reluctance to bid against itself as the last remaining bidder, but if $75 was unacceptable, then $76 hardly seems like a victory," said BB&T analyst Maczka.
Activist investor ValueAct, Garden Denver's third-largest shareholder and who pushed for a sale last July, came out in support of KKR's $75 offer. The investor reported a roughly 5 percent stake in the company in July.
Another top 10 shareholder, who requested anonymity, told Reuters on Friday that it was fine with the current offer.
KKR's offer is 39 percent above what the stock traded at in late October, when the company said it was exploring a sale. It values Gardner Denver at $3.9 billion including debt, the companies said in a statement.
Based on 49.15 million Garden Denver shares outstanding as of Jan. 31, the equity portion of the deal is valued at $3.74 billion.
KKR and Gardner Denver said they expected the deal to close in the third quarter of 2013.
Gardner Denver said in a regulatory filing late Friday that it would be required to pay a break fee of $103.4 million if the deal is terminated.
The deal will be financed by UBS, Barclays, Citigroup, Deutsche Bank, RBC Capital Markets, Mizuho and KKR Capital Markets.
Goldman Sachs advised Gardner Denver while UBS Securities and Simmons & Co International served as financial advisers to KKR.