The market for industrial valves was $65 billion in 2015 and is expected to climb to $88.4 billion by 2021, based on a recent report by Zion Research, with the oil and gas market accounting for 22 percent of the total. Globally, expanding offshore oil and gas projects, ongoing construction of water infrastructure in developing countries, and increasing demand from the manufacturing and process industries, are all contributing to a forecasted compound annual growth rate of approximately 5.3 percent between now and 2021 for the industrial valve market. In North America, increasing pipeline installations and the replacement of old inefficient valves with more technologically advanced valves in the oil and gas transportation segment are driving the growth.
St. Louis, Missouri-based, Emerson Electric Company agreed to acquire the Valves & Controls business of Pentair plc for $3.15 billion in cash, reflecting a trailing twelve month 2016 estimated earnings before interest, tax, depreciation and amortization (EBITDA) multiple of 14.1x and a 2016 estimated sales multiple of 1.9x. The acquisition enhances Emerson’s Automation Solutions and Final Control businesses and supports its global participation in the control, isolation, pressure relief valve and actuation markets, giving Emerson a larger product portfolio to sell into large and medium projects with their key strategic customers.
Pentair’s significant isolation valve business is a critical addition to Emerson’s pressure relief valves. Isolation valves are important in the process market as well as being a vital component of large global projects. Pentair’s valve business complements Emerson’s work in the oil and gas industry due to Pentair’s position in the chemical, mining and power markets. On a geographic basis, Emerson, who is stronger in the U.S. and Canada, will gain better positions in Asia Pacific and Europe through Pentair.
According to Emerson, the deal will increase the company’s share of the $105 billion process market, moving it from a 7 percent to 9 percent share, and almost double its share of the $29 billion final control market, moving from a 7 percent to 13 percent market share.
Headquartered in Switzerland, the Pentair Valves & Controls business had sales of $1.8 billion in 2015 and almost 7,500 employees worldwide. The business designs, manufactures and services valves, fittings, automation and controls, and actuators for the industrial and energy verticals. Valves & Controls’ products are used in many applications including chemical and pharmaceutical, oil and gas, power, mining, marine, and food and beverage. Its valve products include a broad range of industrial valves, including on-off valves, safety relief valves and other specialty valves. Actuation products include pneumatic, hydraulic and electric actuators. Control products include limit switches, valve positioners, network systems and accessories.
Pentair acquired the Valves & Control business in 2012 through its all-stock merger with the flow control business of Tyco International Ltd. The divestiture will allow Pentair to focus on its priorities in water quality and availability, equipment and building protection, industrial and process efficiency, and food and beverage processing.
Emerson designs and manufactures products, and delivers services to industrial, commercial and consumer markets worldwide. The company is made up of five business units: Process Management, Industrial Automation, Network Power, Climate Technologies and Commercial & Residential Solutions. In 2015, the company had sales of $22.3 billion. In early August the company announced the sale of its Network Power business for $4.0 billion to Platinum Equity. Based in Columbus, Ohio, Network Power is a leading provider of thermal management, A/C and D/C power, transfer switches, services and information management systems for the data center and telecommunications industries.
Emerson and Pentair Valves & Control Complementary Market Share