WATERJET MERGER OFF
The proposed merger was almost 18 months in the making, and
it had run its regulatory gauntlet, but in the end it was
scuttled for banking reasons. Last month Flow
International Corp. president and CEO Charley Brown
announced that “after a thorough review of our financing
alternatives, and discussions with Omax Corp.
about modifying the terms of the transaction, we have decided
that acquiring Omax would be excessively dilutive to Flow
shareholders.
When waterjet producer Flow International and competitor Omax
announced the would-be takeover in 2007 (see M.I.R. 12/14/07),
there was talk of synergies, a natural fit between pioneers, and
expansion of distribution channels.
Initially, the Federal Trade Commission charged that the
proposed $109-million acquisition would be anticompetitive and in
violation of antitrust laws. That was a move that Flow said it
anticipated. But last July the FTC accepted a consent decree with
Flow, in which the purchaser would have made available to other
abrasive-waterjet companies royalty-free licenses to Omax’s two
broad patents. That would have ensured other firms could replace
the competition that otherwise would have been eliminated.
Then in March as the capital markets started drying up the
two companies amended their merger agreement, changing Flow’s
opportunity from an obligation to an option to be exercised. They
also agreed to settle ongoing patent litigation between the
firms. The final decision to pull the plug came in May, not long
after Flow signed an agreement with Kuka Robot
Group (Augsburg, Germany) to form a strategic alliance
for precise robotic manipulation of ultrahigh-pressure waterjets.
Both Flow and Omax are in Kent, Wash. and often have shared
the local talent pool.
Concurrent with quitting the Omax acquisition, Flow announced
establishment of a network of new distributors, many in the
machine-tool industry. Within the U.S., newly signed distributors
are Capital Machinery Technologies,
Ellison Machinery Co., Fox Machinery
Associates, Gladwin Machinery & Supply
Co., and Modern Machinery Co. In
Canada, Flow signed with Modern Tool, Wallace Machinery& Tool
Co., and Westway Machinery. Also, waterjet consumables and spares
will be sold through Global EDM Supplies Inc.
Flow executive VP Jeff Hohman says the added network of eight
outlets represents the foundation of a new channel of
distribution that will enhance the availability of waterjets
across all market segments.
Flow International Corp., Kent, Wash. 253-850-3500.Omax
Corp., Kent, Wash. 253-872-2300.
Reported by Metalworking Insiders' Report newsletter, copyright 2006 by Gardner Publications, Inc., editor: Joe Jablonowski. Visit web site on
http://www.metalworkinginsider.info.
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