No, Beyonce isn’t pregnant, but there is a new Knowles, well…a Knowles Corporation coming next year following Dover Corporation’s (DOV) announced spin off of its communications technologies business. The new company is ‘expected to be an industry leader’ in acoustic components (ex. MEMs microphones, speakers, receivers and transducers) and communication infrastructure components. According to a company presentation (the one dated May 23rd), on a pro forma basis Knowles is expected to generate about $1.3 billion in revenue for 2013 with EBITDA in the mid-$20 millions, with the bulk coming from acoustic components.
After the transaction, Dover will once again be a more focused ‘industrials’ company with product categories including energy, fluids, refrigeration & food equipment and printing & identification. On a pro forma basis, Dover’s 2013 post-spin revenue is expected to be between $7.4-7.6 billion.
As this WSJ article points out, the spinoff represents a pretty dramatic shift in Dover’s thinking as the communication technology segment was often touted by the company for its high growth. The company invested significant resources into acquisitions including Sound Solutions just a couple of years ago for over $800 million and Knowles Corp (then just a maker of acoustic products) in 2005 for $750 million. Although the business had been growing nicely, it required lots of investment and the margins in the overall sector are being squeezed. Additionally, according to CEO Robert Livingston, many investors grew wary of the higher volatility associated with this business segment and preferred the slower growing but more predictable industrials business.
That factor, along with the necessary growth investment, seem to be the driving forces behind the move. Analysts who cover the name seem to be supportive of the move and it even scored an upgrade from BoA. Not surprisingly, the stock was up nicely following the announcement.
Post-spin, the current CEO & President of the communication technologies unit, Jeffrey Niew, will remain with the business and become President & CEO of Knowles. Additionally, the newly spun out company is expected to pay a ‘special one-time’ dividend to Dover of ~$400 million. The spinoff is expected to be completed early next year and its completion is subject to the typical regulatory approvals.
Disclosure: Author holds no position in any stock mentioned.
- Dover (DOV) Latest Diversified Industrial to Announce Streamlining; More to Follow? (streetinsider.com)
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