Fairbanks Morse sold to private firm

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CHARLOTTE, North Carolina — Fairbanks Morse, which has had a banner year gaining Navy contracts for construction of ship engines, is being sold to Arcline Investment Management, a private equity firm.
EnPro Industries Inc., owner of Fairbanks Morse, announced Thursday it has entered a definitive agreement to sell the ship engine maker to Arcline for $450 million. The sale is subject to potential adjustment at closing.
Fairbanks Morse has a manufacturing facility in Beloit with 400 workers.
In an interview just this past Monday, President Deepak Navnith told the Beloit Daily News business has grown 20 percent last year with business expected to grow 10 percent more in 2020 with the company working to find more staff. Last year the company spent close to $30 million in capital investments at the Beloit plant, Navnith said.
During a conference call with company officials Friday morning, spokespersons were asked the top three reasons for the sale. They said Fairbanks Morse is a large low volume assembly operation that has heavy infrastructure and project management. Although it’s been very successful, its license is very unique compared to the rest of the EnPro portfolio.
“This transaction is a significant milestone in the continued evolution of our portfolio,” said Marvin Riley, Chief Executive Officer of EnPro. “Fairbanks Morse, which constituted our Power Systems segment, is a premier provider of large, complex power systems, primarily serving the U.S. military. After thoughtful consideration we determined that Fairbanks Morse would be better able to achieve its goals in an alternative setting. This transaction bolsters our already strong balance sheet and improves our flexibility to deploy capital towards businesses with characteristics that are more similar to EnPro’s core businesses.
“I would like to thank the Fairbanks Morse team for their hard work and dedication that has put the business on a clear growth trajectory. We were able to monetize this momentum through a sale to Arcline, and we are confident they will continue this strong growth trend,” he added.
The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close by March 31, 2020. EnPro’s Power Systems segment will be classified as a discontinued operation for the fourth quarter and full year 2019, and all prior quarterly and annual results will be recast to reflect Fairbanks Morse as discontinued, consistent with accounting requirements.
“Since Fairbanks Morse will be accounted for as a discontinued operation for fiscal 2019, we are discontinuing our adjusted EBITDA guidance for the year. Our overall view of the year, however, has not changed since we provided updated guidance on the third quarter earnings call, and we are reaffirming our expected 2019 full-year adjusted diluted earnings per share guidance range of $3.90 to $4.04, which is inclusive of Fairbanks Morse as a discontinued operation,” stated Mr. Riley.
Upon closing, EnPro expects to use net proceeds to pay down part of its debt, while maintaining a disciplined approach to deploying capital for increased shareholder value, which could include future acquisitions and share repurchases.
Arcline is a private equity firm with $1.5 billion in capital, investing in niche, market-leading companies.