Generac to acquire Mexico City generator manufacturer

Selmec Equipos transaction expected to close by August

Generac's headquarters in Waukesha.

Waukesha-based Generac Holdings Inc. today announced it has agreed to acquire the shares of Mexico City-based Selmec Equipos Industriales S.A. de C.V. and its subsidiaries. The price of the transaction, which is expected to close in three to six months, has not yet been disclosed.

Generac’s headquarters in Waukesha.

Generac, founded in 1959, manufactures generators and engine-powered products for the residential, light commercial and industrial markets. In the acquisition, it will take on the power generator product and after-sale support services from the Selmec business.

Selmec was sold by private equity fund Enesa Energia S.A. de C.V. and Enesa S.A. de C.V. Founded in 1941, Selmec manufactures industrial generators of between 10 kW and 2,750 kW, as well as natural gas and LP gas generators from 30 kW to 400 kW. The company, which also provides engineering, procurement, implementation, operation and maintenance for power generation and management, has about 300 employees. It has about 100,000 square feet of production space.

“This is a very exciting development for Selmec to partner with a global leader in power generation technology to offer an expanded portfolio of products and solutions,” said Gabriel Hajj, chief executive officer and principal at Enesa. “This transaction will allow Selmec to continue to innovate, leveraging Generac’s technical capabilities and expertise especially in gaseous powered generation. We are pleased to join the Generac family, and we look forward to our continued success as we work together to provide greater value to our customers.”

Generac said it expects to benefit from Selmec’s market-leading service platform, specialized engineering capabilities, and strong integration, project management and remote monitoring services. The addition of Selmec will also help expand its reach in Latin America.

“Selmec’s deep experience in standby energy solutions, specifically telecom, data center and other mission critical applications, where power is essential for operational continuity, makes this a great fit for our Latin America strategy,” said Ricardo Navarro, senior vice president – Latin America at Generac. “Acquiring Selmec will allow us to dynamically scale our existing Ottomotores business, leveraging both distribution and operational footprints of the combined businesses to offer the Latin American market a broader portfolio of products and solutions.”

Generac also today reported its fourth quarter results.

Net income was $82.5 million, or $1.30 per share, in the fourth quarter, up from $41.6 million, or 64 cents per share, in the fourth quarter of 2016.

The fourth quarter of 2017 included a non-cash gain of $28.4 million, or 45 cents per share, driven mainly by the revaluation of Generac’s net deferred tax liabilities as a result of the enactment of the new federal tax law. Income taxes for fourth quarter of 2017 were only $607,000, rather than an expected $29 million.

“We believe the recent passage of this legislation could have a favorable impact on future demand within many of the end markets we serve,” said Aaron Jagdfeld, president and chief executive officer of Generac. “The stimulus provided by lower cash tax obligations could further improve business sentiment and may lead to incremental investments in equipment, facilities and infrastructure in the U.S.”

Operating income was $94.1 million, up from $77.2 million in the year-ago quarter.

Revenue totaled $488 million, up 16.9 percent from $417.4 million in the fourth quarter of 2016. About $9.6 million of revenue came from the acquisition of Motortech, which closed in January 2017.

Generac pointed to one of the most active storm seasons in recent memory as one of the reasons for its gains, with near-record levels of home standby generator shipments and higher portable generator demand.

“Overall fourth quarter results provided a great end to 2017 as we experienced record quarterly sales through strong core organic fit growth of approximately 13 percent,” Jagdfeld said.

For the full year, net income was $161.1 million, or $2.56 per share, up from $98.8 million, or $1.50 per share, in 2016.

Full-year operating income was $251.1 million, up from $204.6 million in the prior year.

Generac’s 2017 revenue was $1.7 billion, up 15.8 percent from $1.4 billion in 2016.

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Molly Dill
Molly Dill, former BizTimes Milwaukee managing editor.

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