ITT to Acquire O.I. Corp - Analyst Blog

ITT Corporation (ITT) has entered into an agreement to acquire all outstanding shares of O.I. Corporation (OICO), based in College Station, Texas. The transaction, worth approximately $29 million, is expected to close by the end of 2010, subject to shareholders' approval.
 
The acquisition of O.I. Corporation, an important supplier of inventive laboratory and environmental testing equipment in the pharmaceutical, petrochemical, power and industrial markets, provides a boost to ITT Corporation's global analytical instrumentation business. ITT Corporation started its Analytical Business, a part of Fluid Technology segment, with its acquisition of Nova Analytics in April 2010. The company is focused to make attractive acquisitions for expanding its existing analytical instrumentation portfolio.
 
ITT Corporation will use its European brands and channels to bring O.I. Corporation's technologies to those markets. Upon the completion of the acquisition, O.I. Corporation will be a subsidiary of ITT Corporation, working as OI Analytical. The purchase price of O.I. Corporation has been fixed at $12 per OI share, representing a premium of 43% to the closing share price on September 13, 2010. As per the deal, the shareholders of O.I. Corporation, before the close of the acquisition, may also receive a one-time special dividend of up to $0.50 per share, apart from the regular fourth-quarter dividend of $0.05.
 
The company plays an important role in vital markets, including water and fluids management, global defense and security, and motion and flow control. It possesses industry-leading brands in its Fluid Technology and Motion & Flow Control businesses. The company is well diversified and serves attractive end-markets with a broad geographic footprint.
 
We are particularly bullish about two segments: a) water equipment (primarily pumps), which should benefit from the replacement and upgrading of aging networks in developed markets and the build-out of infrastructure in the emerging markets, and b) ITT's defense business, with the bulk of sales derived from electronic and network-centric warfare.
 
However, the company's Defense Electronics & Services business segment is subject to a number of risks, including defense budgets and government contract requirements and regulations, which could have an adverse impact on the results of its operations. Further, macroeconomic and business conditions, particularly in the local economies of the countries or regions in which the company sells its products, may significantly and negatively impact its revenues, profitability and results of operations.
 
Headquartered in New York City, ITT Corporation is a global multi-industry leader in high-technology engineering and manufacturing services. It is engaged in the design, manufacture and sale of a wide range of engineered products and services for three vital markets: water and fluids management, global defense and security, and motion and flow control. Major competitors of ITT Corporation are Lockheed Martin Corporation (LMT) and Raytheon Co. (RTN).
 
We continue to maintain a Neutral rating on ITT Corporation, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
 

 
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