Milwaukee-based Rexnord Corp. plans to focus its water management business on its Zurn subsidiary after announcing plans to sell VAG, the company’s water and wastewater infrastructure operations.
“If you look at the fundamentals of the (VAG) business, it just doesn’t match with the other parts of Rexnord,” Todd Adams, Rexnord president and chief executive officer, said during the company’s earnings call.
Rexnord acquired VAG, which produces engineered valves, in 2011 for $238 million.
Adams said Rexnord is “well into the process” of selling the business, describing it as an auction process along with an engagement with some selected companies. He said the business should be attractive to strategic and financial buyers and the company hopes to have the deal completed within the first half of its fiscal year, which started in April.
He said it was too early to estimate the potential proceeds of the VAG sale, but said the money would go towards improving Rexnord’s balance sheet, potential organic and inorganic investments and in returns to shareholders.
Rexnord announced in 2015 it would move Zurn’s headquarters to Milwaukee, building a new facility in the Reed Street Yards in Walker’s Point. Those operations would seem to benefit from the increased focus Rexnord is placing on the business, but company officials did not respond to requests for comment.
Zurn is a leader in the North American specification-grade plumbing products market. It has a particularly strong presence in institution, nonresidential building construction, including education, health care, transportation and public sectors.
Revenue from the core Zurn business increased 4 percent in Rexnord’s 2018 fiscal year to $610 million with adjusted earnings before income, taxes, depreciation and amortization margin improving more than 100 basis points to 25.1 percent.
“Clearly the business is performing well,” Adams said of Zurn, noting it has seen reasonable demand and is benefiting from cost savings and product innovation efforts.
“We’re optimistic with some more focus, and probably some more investment, both organic and inorganic, in Zurn, we’ve got what we think is a best in class water management platform,” Adams said.
