Milwaukee-based Zurn Water Solutions was four months removed from completing a major transaction that changed its name from Rexnord, spun-off the majority of the company and merged it into Regal Beloit when it announced a deal in February to acquire Illinois-based Elkay Manufacturing Co. New SEC documents filed in early April, however, show Zurn chief executive officer Todd Adams and other leaders had been working on the Elkay deal since April 2021. Here’s a timeline of how the negotiations went:
February 2021: Rexnord (now known as Zurn) announces plans to merge its process and motion control business with Regal Beloit.
March 17: After strategic review, the Elkay board decides there are no sale options that would maintain company legacy and culture and decide to move forward with an initial public offering of 20%-25% of company’s stock.
April: Zurn CEO Todd Adams and Elkay CEO Tim Jahnke have preliminary talks about combining their businesses.
June 15: Elkay holds a kick-off meeting for a potential IPO at JPMorgan Chase & Co. offices in Chicago.
June 21: Adams and Jahnke meet again to talk about a combination. Adams suggests the two sides enter into a non-disclosure agreement.
June 23: Jahnke updates Elkay’s board on the IPO process and shares that four companies, including Zurn, had expressed interest in alternatives to the IPO. Ronald Katz, the largest shareholder of Elkay, says he’s not in favor of selling the company.
June-July: Jahnke, Katz and other Elkay shareholders have additional talks and agree to at least hold talks with potential buyers who could address concerns about the company’s legacy and culture.
July 21: Zurn and Elkay enter into an NDA.
August 25: Zurn executives present Elkay leaders and board members with an overview of Zurn’s opportunities once the Regal Beloit deal is done and the merits of combining the two companies.
September 22-23: Elkay’s bankers tell the board an IPO would likely be well-received by the market, but a deal with Zurn offered a unique opportunity to merge with a water-only business, receive a higher initial value and offer greater liquidity options. Katz said he would be in favor of a merger if Elkay’s shareholders owned around 30% of the combined company and legacy and culture concerns were addressed.
October 4: The Rexnord-Regal Beloit deal is completed.
October 20-21: Zurn’s board authorizes continued talks with Elkay.
November 19: Elkay’s advisors provide Zurn with a proposal instruction letter for an all-stock transaction, including asking for proposals on dividend policies, valuation detail and post-closing governance.
November 29: Zurn provides Elkay with an initial term sheet that includes 48.2 million Zurn shares for Elkay stockholders, giving them 27% ownership of the company, plus including Elkay representatives on the Zurn board.
December 3: Elkay provides a counter proposal that calls its shareholders to receive 52.5 million shares, accounting for 29% ownership.
December 10: The two sides agreed in principle to the terms of a cash-free, debt-free merger with 52.5 million shares.
December-February: Zurn, Elkay and their advisors negotiate a number of agreements related to the deal and conduct due diligence.
February 12, 2022: The two sides sign the merger agreement and other documents.
February 14: The deal is announced.