UPDATE 3-AO Smith to buy rival Lochinvar for $418 mln
10-Q4 EPS before 1-
Time item * see some weaknesses in China, North America * shares rose as much as 11 pct (
Add conference call notes, details in paragraph 1-3,6,9,16-20)
Bangalore, July 19 (Reuters)-A. O.
Smith will buy rival Lochinvar Corp. for $0. 418 billion, the biggest deal to date, aiming to expand and strengthen its presence in the global hot water market.
AO Smith\'s share price rose nearly 11%, its first purchase since the company agreed to sell its car business in last December to focus on hot aquatic products.
\"The North American Boiler opportunity is a reasonable expansion of our core water heater business, and Lochinvar\'s products are highly complementary to our current product line, CEO Paul Jones said in a conference call with analysts.
Lochinvar enables the boiler to be used in commercial and residential circular heating and hot water applications.
For the 12 months ended June 30, sales amounted to approximately $0. 2 billion.
AO Smith expects the deal to increase revenue by 10 cents per share in the fourth quarter, excluding 1 cent
Time transaction fees, and 40-
In 2012, 50 cents a share.
AO Smith will not bear Lochinvar\'s current debt, but if certain revenue targets are met by November 2012, he will pay an additional $35 million to his private shareholders.
In December, Smith decided to sell his motor business to Regal Beloit for about $0. 875 billion.
By selling, the company basically withdrew from the motor business, focusing only on residential and commercial hot water equipment and water purification equipment.
With the addition of the US, sales are not over yetS.
The antitrust regulator has asked the companies to provide more information.
Initially expected to end in the first half of 2011.
In addition to Lochinvar, the United States of AO SmithS.
Competitors include Rhine manufacturing and Bradford-White Corp.
Haier Electric is China\'s main competitor.
Earlier Tuesday, AO Smith posted better newsthan-Expected second
But with higher second-quarter data and weak sales of some products in China and North America, the company narrowed its earnings forecast by 2011.
The company said it had higher sales
Efficiency products in North America are not as strong as they expected, as some tax incentives were reduced earlier this year.
The company said sales of water treatment products sold through wholesale channels in China lagged behind.
In a conference call, CEO Jones also said the company was cautious about the outlook due to steel costs.
Jones continues to predict that the water heater business in China will take 2-
Three times the country\'s GDP.
AO Smith has been betting that China and India will grow rapidly as the US economy is weak. S.
The residential and commercial construction market continues.
CEO Jones said about $0. 275 billion from the sale would be spent on acquisitions in emerging economies.
A. o. Smith\'s planned capital expenditure is 65 million and 2011 of $.
The third will be used for capacity expansion in China.
Milwaukee, Wisconsin stocks
Shares of AO Smith rose $2. 67 at $43.
The New York Stock Exchange traded Tuesday afternoon.
They made $44.
73 morning meeting. (Reporting by A. Ananthalakshmi;
Supplementary Report by Soham Chatterjee;
Edited by Chakrabarty and Gopakumar Saumyadeb Varya)