Rexnord Expands Energy Business in India with Euroflex Buy - Analyst Blog

Diversified machinery product manufacturer Rexnord Corporation (RXN) has inked a definitive agreement to acquire Euroflex Transmissions for an undisclosed amount. The deal, expected to close in Nov 2014, will strengthen the power transmission technologies of Rexnord. It also opens new opportunities for the company in the global energy and power generation market.

The Acquired

Euroflex Transmissions is a multinational original equipment manufacturing company in India. A prominent supplier of superior disc couplings, the firm generates annual revenues of approximately $16 million. Its products are used in gas compression, power generation and industrial process-based machinery applications. The company enjoys high brand value in the market and is steadily expanding its global business since 1990.

The Acquirer

Rexnord’s has two primary business segments, namely Water Management and Process & Motion Control. With headquarters at Milwaukee, WI, the company conducts trade across several countries around the world.

At an aggregate, the company offers employment opportunities for approximately 7,400 people and holds a high brand value in the global industrial goods market. Rexnord’s business revolves around designing, manufacture and sale of specialized machinery components used for complex mechanical systems. Additionally, the company functions to ensure superior water management.   

Impact of the Acquisition  

The acquisition is expected to be beneficial for Rexnord’s growing portfolio of power-based transmission technologies. Following the transaction, Rexnord’s product offerings will expand in fields of turbine-driven and high-speed applications. Thus, the deal will help Rexnord leverage the rising demand in the global energy and power generation market.

By acquiring Euroflex, Rexnord will upgrade its global commercial presence. Furthermore, the specialized low-cost manufacturing technologies of Euroflex will facilitate Rexnord’s developing country business expansion programs.

The acquisition is expected to boost the trading platform of Rexnord but market risks and uncertainties might offset such benefits in the near future.

Rexnord, with a market capitalization of $2.95 billion, currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry includes CUI Global, Inc. (CUI), AO Smith Corp. (AOS) and Advanced Emissions Solutions, Inc. (ADES), each holding a Zacks Rank #2 (Buy).

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