* 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
By A. Ananthalakshmi
March 8 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
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
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
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
Goldman Sachs advised Gardner Denver while UBS Securities
and Simmons & Co International served as financial advisers to