Concentric acquired by Haldex of Sweden

Swedish-based automotive technology group Haldex has acquired 100 percent of Concentric plc, the leading manufacturer worldwide of oil, fuel, and water pumps for medium- and heavy duty diesel engines, for £75 million in cash. The acquisition is subject to regulatory approval in Germany and is expected to close before the end of April 2008.

Concentric was previously owned by European private equity firm Bridgepoint. The company now forms part of Haldex’s Hydraulic Systems division, and its CEO Ian Dugan will take over as head of the enlarged division. Customers will benefit from the strong focus of both companies on technology leadership in environmental improvements and engine efficiency.

“The Concentric management team will add valuable expertise to Haldex Hydraulic Systems, [which now] has the foundation for being a truly leading business internationally with a niche product offering in applications for diesel engines with a strong focus on emissions reduction and fuel efficiency,” Haldex CEO Joakim Olsson said in a release.

“Within Haldex we will be able to continue and further develop Concentric’s commitment to innovation and an expanding global presence. Our customers will benefit from the strong focus of both companies on technology leadership in these areas,” Dugan added.

With Concentric, Haldex Hydraulic Systems’ global reach in the diesel engine market, as well as production, sourcing and R&D, will be significantly strengthened. Haldex also expects to derive synergies in sales and marketing, administration, and transfer of best practices.

The Hydraulics division will now have a truly global manufacturing base and a powerful position in emerging markets, notably China and India, the release said.

Annual cost synergies are estimated at approximately SEK 70 million ($11.3 million) and to be achieved within four years following closing of the transaction. Costs for achieving the synergies are estimated at up to SEK 20 million ($3.2 million).

In addition, revenue synergies from cross-selling provide an opportunity for the combined business. The two businesses are complementary in terms of product, with Haldex specialising in hydraulic pumps and Concentric in engine pumps.

Nitin Pagrut, executive director of Concentric Pumps (India) Pvt Ltd, told Autocar Professional the acquisition by Haldex would yield significant synergies for Concentric’s India operations as well, by adding solutions for closed crankcase ventilation and EGR to its existing portfolio of water and oil pumps.

“Our presence in the major OEMs like Tata Motors, which we supply through Tata Cummins, gives us the opportunity to cross-sell Haldex’s Alfdex and Varivent products,” he said, adding that the enlarged Haldex Hydraulics would benefit immediately from an ongoing expansion of Concentric’s Pune facilities.

Including the acquired Concentric business, Hydraulics will have combined sales of approximately SEK 2.4 billion ($390 million) with a combined operating margin of approximately 8.5 percent, before realisation of any synergies and before any amortisation of acquisition-related excess values. Haldex’s ambition is to grow Hydraulics to a turnover of SEK 3.2–3.5 billion ($520–570 million) with an operating margin of 10–11 percent by 2011.

Haldex has over a period of time reviewed its development opportunities in the Hydraulic Systems division. An attractive area is products for diesel engines with a focus on emission reduction and fuel efficiency where Haldex already has a strong niche position with products such as Alfdex, Varivent, and fuel pumps.

Concentric adds to this innovative variable flow oil pumps, which reduce emissions and energy consumption. Demand for increasingly efficient pumps for diesel engines, such as fuel pumps for common rail systems, is growing due to increasingly strict fuel efficiency and environmental requirements, the release added.