MANSFIELD — The Gorman-Rupp Company (NYSE: GRC) announced Wednesday morning it has entered into a definitive agreement to acquire the assets of Fill-Rite and Sotera (“Fill-Rite”), a division of the Tuthill Corporation, for $525 million, according to a press release.
When adjusted for approximately $80 million in expected tax benefits, the net transaction value is approximately $445 million, the release stated. Gorman-Rupp expects to fund the transaction with cash on-hand and new debt.
“We are extremely excited to welcome Fill-Rite’s impressive portfolio of mission-critical pumps and its outstanding team of employees to the Gorman-Rupp family,” said Scott King, President and Chief Executive Officer of Gorman-Rupp. “Altogether, with our combined capabilities, we expect our revenues to reach over $500 million annually — a significant milestone.
“In addition to the natural product adjacencies between Gorman-Rupp and Fill-Rite, we truly believe that the two companies are culturally aligned. We look forward to working with the Fill-Rite team to continue to drive shareholder value and to execute on our strategic business plan.”
Subject to customary closing conditions and necessary regulatory approvals, the transaction is expected to close in the second quarter of 2022.
“We are pleased to have found a partner that represents an excellent strategic fit for both companies, bringing together two pioneering flow control businesses with over 150 years of combined experience operating as market-leaders,” said Jeff Gorman, Executive Chairman of Gorman-Rupp’s Board of Directors. “This exceptional opportunity fits well into Gorman-Rupp’s overall strategic plan to find well-suited opportunities for expansion and innovation.”
Based in Mansfield, Gorman-Rupp is a leading designer, manufacturer, and international marketer of pumps and pump systems. Fill-Rite and Sotera brands, with facilities in Fort Wayne, Indiana and Lenexa, Kansas, carry strong legacies associated with superior products, and hold leadership positions in attractive niche pump markets, Gorman-Rupp stated.
Fill-Rite provides rugged, high performance liquid transfer pumps as well as a comprehensive line of mechanical and digital meters, precision weights and measures certified meters, hand pumps, hoses, nozzles and accessories, Gorman-Rupp noted. For the 12 months ending March 31, 2022, Fill-Rite generated revenue of approximately $140 million and adjusted EBITDA of approximately $34.5 million, representing an adjusted EBITDA margin of 25%.
“I first learned about Gorman-Rupp when I was in high school,” said Jay Tuthill, Chairman of Tuthill Corporation. “That was the Summer of 1969 and I was being given a crash course on ‘Who’s Who in the Pump Business’.
“Now, more than half a century later, I am thrilled to see Tuthill’s Fill-Rite business moving into the Gorman-Rupp orbit. From my first conversation with Jeff Gorman, it was clear we had a lot in common and that will make it easy for the Fill-Rite folks to quickly find their place within the world of Gorman-Rupp.”
Expected Strategic and Financial Benefits
According to Gorman-Rupp, the addition of Fill-Rite will benefit the Mansfield company and its shareholders in several important ways, as follows:
Extends product portfolio: Fill-Rite is a leading provider of mission-critical fuel and chemical transfer solutions
Expands applications and end markets served: Strategically expands Gorman-Rupp’s position in the agriculture, construction and recreation markets; accelerating growth as these markets continue to benefit from secular trends
Market leading brands: Fill-Rite and Sotera both hold niche leadership positions with the #1 or top 3 position across key product lines
Experienced management team: Fill-Rite’s management team, which has driven significant organic growth, will continue to lead Fill-Rite as a new division of Gorman-Rupp
U.S. based production and supply chain: Fill-Rite’s supply chain is 95% U.S. based, mitigating risk of disruptions and dislocations
Revenue Synergies: Opportunity to leverage commercial channels to drive revenue synergies
Attractive financial benefits: The transaction is expected to be accretive to Gorman-Rupp’s organic growth, gross margins and EBITDA margins, and is expected to be cash EPS accretive with double digit percentage accretion anticipated in 2023
Strong Free Cash Flow: Accelerated deleveraging anticipated from expected strong free cash flows of the combined businesses. Leverage target of less than 3.5x anticipated by the end of 2024
Aligns with articulated acquisition strategy: Fill-Rite aligns with Gorman-Rupp’s disciplined acquisition criteria focused on pumps and pumping solutions
The transaction is not expected to impact Gorman-Rupp’s dividend policy, including maintaining its historic record of annual dividend increases.
Investor Conference Call
Gorman-Rupp Executive Chairman, Jeff Gorman, President and CEO, Scott King, and Chief Financial Officer, Jim Kerr, will discuss the acquisition on a conference call with investors on Wednesday April 27, 2022 at 11 a.m. Eastern.
A live audio webcast of the call, along with the related presentation, can be accessed from the Investor Information page of the Company’s website at www.gormanrupp.com shortly before the call begins or by dialing toll free 1-877-704-4453 (international callers dial 1-201-389-0920) and provide conference ID #13729566.
A replay of the conference call will be made accessible once it becomes available and will remain accessible through Wednesday, May 11, 2022 by dialing 1-844-512-2921 (international caller dial 1-412-317-6671) and using Pin number 13729566. The webcast presentation will be archived at the Company’s website following the conclusion of the event.
Advisors
J.P. Morgan Securities LLC is serving as exclusive financial advisor to Gorman-Rupp and is providing committed financing. Squire Patton Boggs LLP is providing legal counsel.
Citi is serving as exclusive financial advisor to Tuthill Corporation and ArentFox Schiff LLP is providing legal counsel.
About The Gorman-Rupp Company
Founded in 1933, The Gorman-Rupp Company is a leading designer, manufacturer and international marketer of pumps and pump systems for use in diverse water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire protection, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications.
