KMG Chemicals Inc. announced last week that it will acquire valve lubricant manufacturer Valves Inc. of Texas, known as Val-Tex, for $23.5 million by the end of this month.
With both companies based in Houston, KMG said it has followed Val-Tex for many years, and believes both Val-Tex and the valve sealants and lubricants market it serves are attractive and profitable.
The industrial valve lubricants market is large and highly fragmented, KMGs Investor Relations Manager Eric Glover told Lube Report. The market is served by a lot of companies, and we may be able to consolidate some of them.
Val-Tex has an outstanding reputation in valve lubricants … and has demonstrated a track record of consistent growth and cash flow generation, Chris Fraser, KMGs chairman and CEO said in an April 1 press release. Our initial focus will be on seamlessly integrating Val-Tex into KMG and supporting their pursuit of growth opportunities in the North American market.
We also see exciting potential to expand Val-Texs participation in international markets by leveraging KMGs global infrastructure and distribution capabilities, particularly in Europe and Asia, Fraser continued. Additionally, we will pursue other attractive opportunities within the global industrial lubricants market to drive cash flow and enhance long-term value for KMG shareholders.
Industrial valve lubricants will become KMGs third segment, joining existing divisions of electronic chemicals and wood treating chemicals.
In addition to purchasing the Val-Tex lubricants business for $23.5 million in cash, the deal also involves KMG common stocks. KMG will cancel the 606,875 shares of its business that Val-Tex owns, and issue new shares to their respective owners at Val-Tex, so that there are no net shares outstanding, Glover added.
The transaction is expected to close in late April, pending customary conditions.
Val-Tex manufactures and distributes industrial sealants and lubricants, lubrication guns and loaders, as well as fittings, adapters and tools. KMG noted that Val-Tex services ease unscheduled maintenance of oil and gas storage, pipeline and distribution equipment and provide safety benefits by reducing valve emissions.
KMG appraised the global valve maintenance market at more than $200 million in annual sales, and noted that Val-Tex captured $12 million in sales in the year ending Feb. 28, 2015.