Parker-Hannifin Corp (PH.N), whose motion and control systems are used in a variety of industries, said on Thursday it would buy Clarcor Inc CLC.N for about $4.3 billion, including debt, to double the size of its filtration systems business.
The deal, Parker-Hannifin's biggest ever, will also expand the company's after-market business, where maintenance and repair services and sales of accessories offer a more stable and recurring revenue stream than product sales.
Parker-Hannifin makes fluid power systems, electromechanical controls, seals and other products used in many industries. Its filtration products remove contaminants from fuel, air, oil, water and other liquids and gases.
Clarcor's filtration products are used in buildings, airplanes, hospitals and trucks among other places. Its products for the transport industry include hydraulics, coolants and fuel-and-water separators.
Clarcor's high percentage of recurring after-market sales would make Parker-Hannifin less vulnerable to business cycles, Parker-Hannifin Chief Executive Tom Williams said.
Clarcor's shares jumped 17.7 percent to a record high of $82.94, just below the offer price of $83. Parker-Hannifin rose 3.3 percent to a record of $143.53.
Franklin, Tennessee-based Clarcor's sales were $1.4 billion for the trailing 12 months as of Aug. 27, with about 80 percent coming from after-market sales, according to Parker-Hannifin.
Parker-Hannifin's sales were $11.36 billion last fiscal, with about $1.2 billion coming from its filtration business. Clarcor will be a part of its diversified industrial division.
Following the deal, after-market sales will account for 54 percent of the division's sales, up from 50 percent earlier, Cleveland-based Parker-Hannifin said.
The company will assume Clarcor's long-term debt of just over $300 million. It said it plans to finance the deal with $1.5 billion in cash and $3 billion in debt, of which it plans to pay off about $1.3 billion within three years.
Morgan Stanley is Parker-Hannifin's financial adviser and Goldman Sachs is Clarcor's adviser.
(Reporting by Arunima Banerjee in Bengaluru; Editing by Savio D'Souza)