Lincoln Electric Holdings Inc. (LECO) announced that it has signed a definitive agreement to acquire Russia-based leading manufacturer of welding consumables, OOO Severstal-metiz welding consumables. The transaction includes acquiring manufacturing operations as well as exclusive distribution rights of the Severstal brand of welding products.
Severstal-metiz Welding Consumables is the subsidiary of Severstal-metiz and produces a wide range of electrodes, welding wire for the pipe industry and flux-cored welding wire. The Severstal-metiz group of companies incorporates all the metalware assets of OAO Severstal, one of the world's leading vertically integrated steel and mining companies with key assets in Russia, the US and Europe.
The Severstal-metiz group is among the top European producers of wire and wire products and caters to the construction, oil and gas, automotive, metallurgy and engineering industries.
The transaction is pending review by the Russian regulatory authorities and is expected to close during the first half of 2011. OOO Severstal-metiz's Welding Consumables' manufacturing production facilities are based in Orel, Russia and employs 283 people. OOO Severstal-metiz welding consumables is expected to generate sales of approximately $40 million in 2010.
This acquisition will enhance Lincoln Electric's manufacturing capacity in the fast growing markets of Russia and Commonwealth of Independent States (CIS). This acquisition is in line with Lincoln Electric's recent acquisition of Russia-based welding wire manufacturer Mezhgosmetiz-Mtsensk OAO in October.
The acquisition provided Lincoln its first manufacturing operation in Russia as well as distribution channels to serve the growing Russian and Commonwealth of Independent States (CIS) welding markets.
Severstal's extensive stick electrode offering, along with its wire and wire products, when combined with solid wire products from Mezhgosmetiz-Mtsensk OAO, is expected to position Lincoln Electric as a leading consumables manufacturer in the CIS countries.
Lincoln Electric is pursuing a multi-year strategy to become more cost competitive by building manufacturing facilities in Eastern Europe, India, China and South East Asia. The company is resorting to acquisitions to expand its manufacturing capabilities, broaden its distribution networks and access growth markets.
Also, Lincoln Electric is implementing various cost-control measures. Further, demand for its products is on the rise, leading us to believe that the company will post strong growth on the heels of an economic recovery and investments in the emerging markets. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.
Cleveland, Ohio-based Lincoln Electric deigns, develops and manufactures arc welding products, robotic arc-welding systems, plasma and oxyfuel cutting equipment and commands a leading position in the brazing and soldering alloys market. Lincoln Electric competes with Illinois Tool Works Inc. (ITW), Charter International Plc and ESAB Group Holdings Ltd.
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