SPX Corp is in exclusive talks to buy rival Gardner Denver Inc and hopes to finalize a deal by the end of the year, four people familiar with the matter said, in a merger that could create an industrial machinery conglomerate with a market value of over $7 billion.
Gardner Denver told private equity bidders KKR & Co LP , Advent International and a consortium of TPG Capital LP and Onex Corp to put their pencils down until January while it negotiates a deal with SPX, the people said on Monday on condition of anonymity because discussions are confidential.
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With a market value of about $3.5 billion, SPX is of similar size to Gardner Denver, which has a market capitalization of $3.35 billion. SPX could use both cash and its own shares to pay for a deal and has reached out to banks for financing to support the cash element of its offer, one of the people said.
Private equity firms, which invest money in buyouts on behalf of major institutional investors such as pension funds and insurance firms, would have been expected to pay Gardner Denver shareholders all cash to take control of the company.
Gardner Denver, SPX, KKR, TPG and Advent declined to comment, while Onex did not immediately respond to a request for comment.
Gardner Denver said on October 25 that it was pursuing strategic alternatives, including a sale of the company, after Reuters reported it had asked its financial adviser, Goldman Sachs Group Inc , to solicit buyout offers.
Last week, SPX said it had completed the sale of its service solutions business to Robert Bosch GmbH for expected net proceeds of about $1 billion, exiting its roots in the car industry to focus on growing its flow technology segment.
SPX Chief Executive Chris Kearney has worked over the past few years to focus the company on its flow control business, which makes equipment used to produce liquids ranging from petroleum to dairy products.
"Even with roughly $1 billion of proceeds expected from the sale of service solutions, SPX would still need to tap the financial markets to finance the acquisition," Deutsche Bank analysts wrote in a December 3 note, cautioning that a deal with Gardner Denver would present a significant financial strain for SPX.
Charlotte, North Carolina-based SPX also makes electrical transformers and cooling towers for power plants, and has been adding and selling businesses to focus more narrowly on becoming a flow technology company.
(Reporting by Greg Roumeliotis and Soyoung Kim in New York; Editing by Bernard Orr)