Assa Abloy to buy Cardo for $1.64 billion

By Simon Johnson and Johannes Hellstrom

STOCKHOLM (BestGrowthStock) – Assa Abloy (ASSAb.ST: ), the world’s biggest lockmaker, launched an 11.3 billion crown ($1.64 billion) offer for industrial door maker Cardo on Monday, to help boost growth in a still sluggish European market.

Assa has suffered from the global downturn of the last couple of years because its fortunes are closely tied to the construction sector.

The Swedish company has forecast only slight organic sales growth this year, partly because of government spending cuts in Europe.

Assa Abloy, which sells locks under brands such as Yale and Abloy, said it had agreed to buy 63.6 percent of the shares in domestic peer Cardo, a supplier of industrial doors.

It will now launch a 420 crowns per share offer for the rest of the shares.

Assa CEO Johan Molin said in a statement the Cardo deal would help the group’s position in the automatic door market in Europe, mainly in the industrial door sector.

The offer represents a premium of around 57 percent compared with Cardo’s volume-weighted average share price during the last three months. Analysts said the price was hefty.

PAYING UP

“But at the same time, that’s what is necessary if you want to buy out a listed company with a strong main owner,” said Peder Frolen, analyst at Handelsbanken Capital Markets.

“In such a case, you basically have to pay what that owner wants,” he said, referring to financier Fredrik Lundberg’s Lundbergforetagen, which has a 41.3 stake in the company.

A second analyst said the price for Cardo was “a bit expensive.”

Assa has shown itself willing to pay up for several of its recent purchases. In October, it bought ActiveIdentity and a stake in Agta Record with premia of 46 and 48 percent respectively.

Assa Abloy has made a string of acquisitions, consolidating 11 companies in the first nine months of the year, with Cardo (CARD.ST: ) the biggest and one of its largest ever.

Cardo had sales of 8.8 billion crowns in 2009 and made an operating profit of 800 million.

Cardo shares were up 47.7 percent at 418 crowns per share at 1018. Assa shares were down 0.26 percent at 190.50 crowns having risen around 38 percent year-to-date.

Assa said combining the companies’ products would create significant synergies, which would be achieved within three years of completion.

Integration costs were expected to be around 200-300 million crowns, it added.

Assa will finance the deal through a new bridge facility which it will re-negotiate during the offer period and replace with a more long-term financing alternative.

Assa said that Cardo’s operations in wastewater solutions and process equipment for the pulp and paper industry business did not fit its own and it would consider selling them.

($1=6.910 Swedish Crown)

(Editing by Hans Peters and Jane Merriman)

Assa Abloy to buy Cardo for $1.64 billion