Industrial machinery maker Gardner Denver Inc said it is exploring strategic alternatives including a potential sale or merger of the company, confirming a Reuters report earlier on Thursday.
Gardner Denver said in a statement that its board of directors is working with its management team and financial adviser Goldman Sachs Group Inc to evaluate options to enhance shareholder value.
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No decision has been made and there is no guarantee the review will result in a transaction, Gardner Denver said. Reuters reported earlier in the day that the company's bankers have reached out to potential buyers in recent weeks, citing people familiar with the matter.
Shares of Gardner Denver surged to a six-month high on Thursday and closed up 20.5 percent at $66, representing a market value of about $3.2 billion. The company had long-term debt of some $400 million as of the end of June.
Several major private equity firms are considering initial offers for the company, which are due on November 5, the people familiar with the matter told Reuters.
TPG Capital LP, Onex Corp , KKR & Co LP , Blackstone Group LP and Bain Capital LLC are among the buyout firms interested in a potential buyout, the people said. TPG and Onex are expected to bid jointly, two of the people added.
Goldman Sachs and Blackstone declined to comment. Bain, TPG, Onex and KKR did not immediately respond to requests for comment.
The move to solicit offers follows months of pressure from activist investor ValueAct Capital LLC, which has been calling for a sale of the company after acquiring a roughly 5 percent stake. ValueAct did not respond to a request for comment.
Gardner Denver, which makes compressors, pumps and vacuum products for industrial uses, hired Goldman Sachs initially as a defense adviser after ValueAct in July urged the company's board to pursue a sale.
The move followed the sudden resignation of Chief Executive Barry Pennypacker earlier that month and his interim replacement by Chief Financial Officer Michael Larsen.
Credit Suisse analyst Julian Mitchell said in a research report on Thursday that a take-out of the company could occur in the $70s per share, and said the stock is inexpensive at current levels even if a sale does not occur.
"We think there should be interest in GDI from both strategic and financial buyers," Mitchell said, adding that a private equity buyer is more likely given extensive cost-cutting planned in Europe and solid cash flow generation.
Mitchell said recent multiples in deals of similar companies imply a take-out price of $73-$82 per share for Gardner Denver.
The company has suffered as a result of its exposure, through its pumps business, to oil and gas prices.
Lower demand for petroleum and industrial pumps pressured the company's engineered products division, which reported a 36 percent drop in orders in the second quarter. The division accounts for 54 percent of Gardner Denver's total revenue.
In August it said it would shut some of its European manufacturing facilities and cut jobs as part of a restructuring plan aimed at cutting costs and expanding margins.
(Reporting by Greg Roumeliotis and Soyoung Kim in New York; Editing by Leslie Adler, Bernard Orr)