KeyBanc Bullish On Altra Industrial Motion After Fortive Acquisition

The bullish case for Altra Industrial Motion Corp AIMC can be made now that the acquisition of Fortive Corp FTV automation and specialty business for $3 billion is underway, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc's Jeffrey Hammond upgraded Altra Industrial Motion from Sector Weight to Overweight with a new $49 price target.

The Thesis

Altra and Fortive confirmed this week that an exchange offer has commenced, and Altra's stock moved lower due to exchange offer arbitrage dynamics, Hammond said in the upgrade note. (See the analyst's track record here.)

Yet the weakness also created an attractive entry point for investors, with the stock trading at around 9.5 times 2019E EBITDA, the analyst said. 

The bullish case for Altra's stock is also based on expectations for the addition of Fortive's A&S business to notably improve the company's growth and return outlook, Hammond said. The transaction will also give Altra critical operational expertise, and these encouraging dynamics aren't factored into the stock, which is trading at a 20-percent discount to peers on EV/EBITDA, he said. 

Altra's valuation should close the gap with peers as management succeeds in integrating the business, and the incremental cash generation from the deal supports faster-than-expected leverage reduction, according to KeyBanc. 

Price Action

Altra shares were rising 1.32 percent to $38.50 at the time of publication Thursday.

Related Links:

Baird Gets Bullish On Altra Industrial Motion Following Fortive Deal

JPMorgan Impressed With Fortive — 'In A Financially Neutral Way'

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