Metalworking Insiders' Report

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.

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