Emerson acquiring Virgo Valves for over $400M | VCCircle
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Emerson acquiring Virgo Valves for over $400M

BY  Shrija Agrawal & Bruhadeeswaran R
Virgo Valves’ parent Virgo Engineers previously sought to go public twice and during its second attempt in 2010 its PE investor was looking to part exit, but the issue did not materialise.

Diversified American engineering firm Emerson, which manufactures industrial controls, power supplies and home-storage equipment, has signed a deal to acquire Virgo Valves and Controls Ltd, a manufacturer of ball valves and automation systems. Virgo Valves is the flagship arm of Pune-based Virgo Engineers which in turn is backed by private equity firm Tano Capital.

Virgo Valves serves diverse markets worldwide, including the oil and gas as well as power and mining industries. In addition to ball valves, it manufactures butterfly valves and severe-service valves for critical applications. Post completion of the transaction, it will operate within Emerson Process Management’s final controls business, serving customers in the energy and process-related industries.

The firm has manufacturing facilities in Europe, the US and India with sales in more than 60 countries last year pegged at around $250 million, more than 80 per cent outside India.

Although the firm did not disclose the deal value, sources privy to the development told VCCircle that it is pegged at over $400 million. The transaction is expected to close early next month.

Virgo Engineers had also received bids from companies based in Japan, Europe and other firms in the US, sources said. The firm was running the sale process itself without hiring any bankers for the transaction.

“Virgo’s leadership in the engineered, on-off valve market is a great strategic fit within our business and strongly complements our Fisher control valve business,” said Steve Sonnenberg, Emerson’s executive vice president who heads Emerson Process Management segment.

Mahesh Desai, co-founder and chairman of Virgo, citing the advantages of Virgo being part of Emerson, said: “The alliance with Emerson, and in particular the Fisher line of products, is a continuation of our growth as a global brand. We appreciate the support of customers, employees and other stakeholders that have been part of our company.”

Virgo Engineers was founded in 1987 by co-promoters Desai and V Balasubramanian. The company started manufacturing operations in Pune in 1990, Milan in 2006, Coimbatore in 2008 and Houston in the US in 2009. It also acquired manufacturing facilities for steam products in Bremen, Germany.

As a group it derives a big chunk of business from the US followed by Middle East and Europe.

Virgo Valves’ parent Virgo Engineers had proposed to go public twice but did not go ahead with the plans. Initially, it had filed its documents for its IPO in January 2008. This was just a week ahead of what led to a global financial markets meltdown. This was a sole primary issue for raising over Rs 200 crore. Given the state of markets it did not go ahead with the issue.

Three years ago, Virgo Engineers had reconsidered a public issue to raise around Rs 350 crore through a fresh issue of shares in addition to offer for sale by Tano Capital and a clutch of individual investors in the company. Tano Capital, which had put in around Rs 50 crore to buy shares of the company in 2006 and held around 9.7 per cent stake, was to part exit at that time. However, the proposed issue also didn’t materialise.

Emerson

Emerson, based in Missouri, the US, is one of the key players globally in the field of engineering catering to industrial, commercial and consumer markets. It has five business segments: process management, industrial automation, network power, climate technologies and commercial & residential solutions. The Asia Pacific region contributes around $5.8 billion or a quarter of its global sales.

In India, the company has four subsidiaries and three global engineering centres and caters to companies for improving their process-related operations.

Emerson’s product offerings such as motors, drives and fans were made available in India during the 1950s. During the 1980s, Emerson entered into joint-venture relationships with several Indian companies to continue growing its business. In more recent years, Emerson has fully acquired several of these joint ventures and integrated them into its existing business platforms.

Emerson posted revenues of approximately $700 million in India in fiscal 2011. It had more than 9,000 employees at 14 manufacturing locations and more than 100 offices across India as of last year. The firm is led by Pradipta Sen who is president of Emerson's India, Middle East and Africa operations.

The company’s last acquisition in India was in April, 2011, when it acquired full ownership of its Fisher Sanmar Ltd joint venture from Sanmar Engineering Corporation, expanding its capabilities in India. This acquisition added to Emerson Process Management’s offering of control valves, industrial regulators and other process technologies and services through the Fisher brand.  The purchase price was $135 million for the business and additional land. The company was renamed as Emerson Process Chennai Pvt Ltd.

Emerson has been active with its inorganic expansion strategy globally and in the latest deal acquired UK-based Groveley Detection Ltd three months ago.

(Edited by Joby Puthuparampil Johnson)

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