Trian And Pentair: Could M&A Be On The Horizon?

Shares of

spiked higher by more than five percent Tuesday after Nelson Peltz's Trian Fund Management was reported to have accumulated a 7.24 percent stake and is pushing the company to explore several strategic options such as acquiring rivals to consolidate the space. In a report published Tuesday, Wedbush analyst David Rose discussed the latest developments, noting that there are three players in the space that could "potentially fit the portfolio." First is

which is trading at a discount to Penair at 9.8x EBITDA versus Penair's 12.3x EBITDA multiple. The analyst noted that Flowserve is "one of the better run companies" but an acquisition by Penair may not provide the same cost cutting valuation creation that it is known for. In addition, Flowserve is "heavily" weighted to Energy which may not provide as much diversification. Rose continued that an acquisition of

could result in "a lot" of synergies, but shares are trading at 11.9x EBITDA and would be less accretive with more business lines than just pumps. As such, the analyst stated that this would contradict the notion of simplicity. Finally, Rose stated that Penair would find it "fairly easy to acquire"

with shares trading at 8.7x 2015E EBITDA. In addition, the company is in the process of spinning its flow or pumps business and would "probably be the best fit." In addition, Penair could have a "more meaningful impact" on the business than it would on Flowserve.

Shares of Penair are Neutral rated with a $65 price target. Shares of Flowserve are Outperform rated with a $71 price target. Shares of SPX are Outperform rated with a $102 price target. Shares of Xylem are Outperform rated with a $39 price target.