Applied Industrial Technologies to acquire Hydradyne

CLEVELAND - Applied Industrial Technologies (NYSE: NYSE:AIT), a leading value-added distributor and technical solutions provider, has entered into a definitive agreement to acquire Hydradyne, LLC, a prominent fluid power solutions company. The acquisition, announced today, is set to enhance Applied's Engineered Solutions segment and strengthen its position in the technical industry.

Hydradyne, headquartered in Dallas, Texas, operates 33 locations across the Southeastern United States and employs nearly 500 people. The company specializes in a wide range of fluid power and motion control systems, including hydraulics, pneumatics, electromechanical, instrumentation, filtration, and fluid conveyance. With a strong focus on system design, fabrication, assembly, installation, repair, and component support, Hydradyne serves both maintenance, repair, and operations (MRO) and original equipment manufacturer (OEM) applications across various industrial and commercial sectors.

The acquisition is expected to contribute approximately $260 million in sales and $30 million in EBITDA, excluding anticipated synergies, to Applied's revenues. It is also projected to be accretive to earnings per share (EPS) within the first year of ownership, before accounting for transaction-related expenses and purchase accounting adjustments.

Neil A. Schrimsher, President & CEO of Applied, expressed confidence in the strategic fit of the acquisition, highlighting the alignment with Applied's long-term goals and the potential for increased market penetration. He emphasized the complementary technical capabilities and the opportunity to serve the evolving demands in fluid power systems related to reshoring, equipment modernization, power management, connectivity, and electrification.

Lon Jennings, President of Hydradyne, remarked on the significance of the milestone for his company, noting that joining forces with Applied will accelerate Hydradyne's growth potential by leveraging mutual capabilities and innovative solutions. He praised Applied's values-based culture, financial strength, and distribution leadership as key factors in the decision to unite with the company.

This acquisition is expected to enhance Applied's footprint in the strategic U.S. Southeast region and provide a more robust value proposition for customers through expanded technical capabilities and access to world-class technologies.

The information in this article is based on a press release statement.

In other recent news, Applied Industrial Technologies has reported mixed results in its Q1 FY2025 earnings call. Despite a 3% decline in organic daily sales year-over-year, the company generated a record free cash flow, nearly doubling from the previous year. The company also raised its EPS guidance for FY2025, indicating optimism for market conditions in the latter half of the fiscal year.

While the Service Center segment experienced a 1.4% organic sales decline and the Engineered Solutions segment saw a 6% organic sales decline, the company anticipates increased customer capital spending in automation and technology sectors. Despite these mixed results, Applied Industrial Technologies continues to focus on strategic investments and acquisitions to drive future growth.

These are the latest developments for the company, which is maintaining its sales guidance between a 2.5% decline and a 2.5% increase. It's worth noting that 13 out of the top 30 markets showed growth, with notable strength in food and beverage, primary metals, and transportation sectors. Despite some challenges, the company remains committed to enhancing shareholder value as FY2025 progresses.

InvestingPro Insights

Applied Industrial Technologies' (NYSE: AIT) acquisition of Hydradyne aligns well with the company's strong market position and financial performance, as indicated by recent InvestingPro data. With a market capitalization of $10.35 billion, AIT has demonstrated impressive growth, reflected in its 67.51% price total return over the past year.

The acquisition is expected to be accretive to earnings, which is particularly noteworthy given AIT's current P/E ratio of 27.21. This valuation metric suggests investors are already pricing in growth expectations, and the Hydradyne acquisition could potentially justify this premium.

InvestingPro Tips highlight AIT's financial strength and consistent performance. The company has maintained dividend payments for 54 consecutive years and has raised its dividend for 15 consecutive years, showcasing its commitment to shareholder returns. This track record is particularly relevant in the context of the acquisition, as it indicates AIT's ability to generate stable cash flows and manage its capital effectively.

Moreover, AIT's strong return over the last decade and its trading near its 52-week high suggest a long-term upward trajectory that the Hydradyne acquisition could further propel. The company's ability to operate with a moderate level of debt and maintain liquid assets exceeding short-term obligations positions it well to integrate Hydradyne without compromising financial stability.

For investors seeking a deeper understanding of AIT's potential, InvestingPro offers 16 additional tips that could provide valuable insights into the company's prospects following this strategic acquisition.

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