Flowserve Divests Business, Shares Up - Analyst Blog

Leading flow control products and services provider Flowserve Corporation FLS on Mar 31, 2014, announced that it has divested the Naval OY business unit including its all-welded ball valve product line to Finnish valve manufacturer, Vexve OY. The financial details of the deal were not disclosed. Following the news, Flowserve's shares rose 0.6% on Apr 1, 2014.  

Additionally, Flowserve has sold off manufacturing facilities in Laitila, Finland and a service and a support center located in St. Petersburg, Russia. The sell-off of the Naval OY business was a strategic move by Flowserve as the business was not generating desired results.

The Naval OY business initially became a part of Flowserve in 2002, when the latter had acquired Invensys Flow Control. The Naval OY business primarily includes products such as the all-welded ball valves which are primarily used in district heating applications. These valves cater to a niche market that are highly cyclical in nature and do not generate the required results for Flowserve.

However, the purchase of the Naval OY business is a perfect match for the Vexve Valves business which primarily manufactures high quality ball and butterfly valves specially designed for the district heating networks.  

Post the sell-off, Flowserve intends to concentrate and build up on its core portfolio comprising flow control equipment, such as pumps, valves and seals, for critical service applications. Prior to this on Mar 26, Flowserve hosted its Analyst Day 2014, where it emphasized that the company is seeking growth opportunities through innovation and expanding its capabilities through strategic acquisitions and divestitures.

Further, management believes that the company has long-term growth prospects and it can strengthen its position through disciplined capital allocation with a focus on returning value to the shareholder.

Currently, Flowserve holds a Zacks Rank #3 (Hold). Better-ranked players in the same industry include Altra Holdings Inc. AIMC, DXP Enterprises DXPE and IDEX Corp. IEX, all three carrying a Zacks Rank #2 (Buy).