Arcline Carves Out Fairbanks Morse

Arcline Investment Management has agreed to acquire the Fairbanks Morse division from EnPro Industries for $450 million. The valuation multiple for this transaction appears later in this article.

Fairbanks Morse manufactures heavy-duty, medium-speed reciprocating engines that are used in marine and power generation applications. The company’s engines are sold under the Fairbanks Morse and ALCO brand names. The company is the principal supplier of diesel engines to the US Navy, US Coast Guard and Canadian Coast Guard, with all manufacturing conducted in the company’s facility in Beloit, Wisconsin.

Fairbanks Morse has been an original equipment manufacturer of engines for more than 120 years and has a large installed base for which it supplies aftermarket parts and services through a network of five service centers located in the US and Canada. The company’s roots date back to 1823 but it began making engines in the 1890s that were used as backup power for windmills. Over the years, the company’s engines have been used in a wide range of applications from municipal, nuclear, and institutional facilities to locomotive engines, and naval and commercial-class ship propulsion and shipboard power.

According to EnPro, the sales price of $450 million is equal to approximately 10.5x Fairbanks Morse’s expected 2019 adjusted EBITDA.

“We are proud to invest in a company that is critical to our national interests. Our intent is to build upon and grow Fairbanks Morse’s 120+ year reputation of dependability, reliability and innovation in serving its long-standing customers,” said Arcline in a released statement.

Arcline makes control investments in companies that have from $10 million to $100 million of EBITDA and enterprise values of up to $1 billion. Sectors of interest include industrials, technology, life sciences, and specialty chemicals. The firm closed its first fund, Arcline Capital Partners LP, with $1.5 billion of committed capital in March 2019. Arcline was founded in September 2018 and has offices in San Francisco and New York.

“This transaction is a significant milestone in the continued evolution of our portfolio,” said Marvin Riley, chief executive officer of EnPro. “Fairbanks Morse, which constituted our Power Systems segment, is a premier provider of large, complex power systems, primarily serving the U.S. military. After thoughtful consideration, we determined that Fairbanks Morse would be better able to achieve its goals in an alternative setting. This transaction bolsters our already strong balance sheet and improves our flexibility to deploy capital towards businesses with characteristics that are more like EnPro’s core businesses.”

EnPro Industries (NYSE: NPO) is a provider of sealing products, metal polymer and filament wound bearings, components for reciprocating compressors, and diesel and dual-fuel engines. The company’s operating units include Fairbanks Morse, Compressor Products International, Garlock Sealing Technologies, GGB Bearing Technology, Technetics Group and STEMCO. EnPro was formed in 2002 when Goodrich Corporation (now UTC Aerospace Systems) spun off its engineered industrial products business into a new company. EnPro is headquartered in Charlotte, North Carolina.

Harris Williams and Moelis & Company were the financial advisors to Arcline in connection with this acquisition.

The sale of Fairbanks Morse to Arcline is expected to close by March 31, 2020.

© 2019 Private Equity Professional | December 13, 2019

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