ITT Industries' acquisition of Goulds to create new leader in pump market

Weekly Corporate Growth Report, May 5, 1997

The Deal: ITT Industries has agreed to acquire Goulds Pumps for $815 million, or $37/share, plus the assumption of $119 million in Goulds debt The deal would make ITT Industries the largest maker of industrial pumps for chemicals, water and other fluids, a position currently held by Japan's Ebara Corp. In 1996, ITT Industries and Goulds sold a combined $21 billion of pumps, compared to Ebara's pump sales of $1.6 billion for the same year.

Discussion: Combined, the companies would have 14% of the $15 billion market for pumps, valves and other flow-control products. The acquisition may lead to a consolidation in the pump industry since companies will be trying to cut their costs.

"It's going to put pressure on other independent public players to think about how they are going to compete with this new, larger company," said analyst Walter Morris, of Robert W. Baird & Co.

After the deal was announced, Standard & Poor's Rating Services placed ITT Industries on Creditwatch with negative implications. Moody's Investors Service also put the company's debt under review for a possible down de, saying that the acquisition could strain ITT Industries balance sheet

The deal is part of an effort to improve ITT's business portfolio. Currently, it is heavily weighted towards auto parts and the company is trying to balance this out Only 15% of the companies 1996 sales were from pumps. The market has a great deal of growth potential, especially in developing countries, where new water and sewage systems are needed.