Exclusive: Gardner Denver-SPX talks end, no deal - source

Industrial machinery maker Gardner Denver Inc has ended talks with SPX Corp and has invited the private equity firms that had made offers for the company to re-engage in a sale process, a source familiar with the matter said on Friday.

Gardner Denver shunned private equity firms abruptly earlier this month when it entered into exclusive talks to be bought by SPX, which offered to pay more based on the synergies it thought it could extract from the Wayne, Pennsylvania-based company, people familiar with the matter had told Reuters.

Gardner Denver shares tumbled on the news, ending trading on Friday down 10.8 percent at $67.40 and giving the company a market value of about $3.3 billion. SPX shares were up 1.1 percent at $65.79.

Talks between SPX and Gardner Denver ended after doubts emerged on both sides about the deal's success, the source said. Private equity firms have now been asked to meet with Gardner Denver management in early January, the source added, speaking on condition of anonymity because the discussions are confidential.

SPX's management came under increasing pressure this week from some of its shareholders, who questioned the rationale of a deal and the price offered to Gardner Denver, another source familiar with the matter said.

Gardner Denver's board met earlier this week and also expressed reservations about the wisdom of carrying out a deal following a detailed assessment of SPX's offer, which would have included a significant stock element, the first source said.

Gardner Denver passed on all-cash offers in the mid-to-high $70s per share from private equity firms Advent International Corp, KKR & Co LP and a consortium of TPG Capital LP and Onex Corp , people familiar with the matter told Reuters last week.

"The Gardner Denver board of directors and management team continue to work with the company's financial advisor, Goldman, Sachs & Co , to explore strategic alternatives to enhance shareholder value," Gardner Denver said in a statement.

"These alternatives could include, among others, enhancing the company's existing strategic plan or a possible sale or merger of the company. The company does not intend to discuss or disclose developments with respect to this process until the board has approved a definitive course of action," the company added.

Charlotte, North Carolina-based SPX did not respond to a request for comment. Advent, KKR and TPG declined to comment, while Onex did not respond to a request for comment.

The talks between Gardner Denver and SPX focused on an SPX offer of around $85 per share, a source familiar with the matter said earlier this week.

Gardner Denver said on October 25 that it was pursuing strategic alternatives, including a sale of the company, confirming a Reuters report earlier in the day.

Gardner Denver makes compressors, pumps and vacuum products for industrial uses. Its decision to explore a sale followed months of pressure from activist investor ValueAct Capital LLC, which acquired a roughly 5 percent stake.

The shareholder campaign followed the sudden resignation of Chief Executive Barry Pennypacker in July and his interim replacement by Chief Financial Officer Michael Larsen, who last month was appointed CEO permanently.

Gardner Denver has grappled with lower demand for petroleum and industrial pumps, which pressured its engineered products group. That group reported a 20 percent drop in revenue in the third quarter.

(Reporting by Greg Roumeliotis in New York; Additional reporting by Soyoung Kim and Michael Erman in New York; Editing by John Wallace, Richard Chang and Peter Galloway)