The action of the Montreal manufacturer of industrial valves Velan fell sharply for the second session in a row, Wednesday in Toronto, leaving doubts surrounding the proposed sale to the American company Flowserve.
Velan operates two subsidiaries in France which, among other things, manufacture valves used in nuclear power plants, and the French authorities are slow to approve the transaction with Flowserve. Velan’s equipment is also found in the construction of French nuclear submarines.
“The process is difficult in France,” admits Flowserve big boss Robert Scott Rowe.
“We work with the Department of Defense, the Department of Energy, it’s not necessarily anti-competitive. It’s more about national security and how France is moving forward. So we will work with them diligently,” he added Wednesday during a conference call with analysts on the sidelines of the Texas company’s most recent quarterly performance presentation.
Velan announced in February that it had accepted an offer of $13 per share from Flowserve. Velan shareholders and the Quebec Superior Court approved the transaction in May.
“At this stage, we have received all necessary regulatory approvals, with the exception of the French government,” says Robert Scott Rowe.
“We’re hopeful we’ll get through it. We are working diligently with the French authorities, but at the moment we do not have a clear vision of their approval timetable. We hope to have better visibility on the path to closing the transaction in the near future. We remain enthusiastic about the combination with Velan and are determined to continue the process until the closing of the transaction. »
Velan and Flowserve announced late Tuesday that the deadline to close their transaction was extended 30 days to September 7, as regulatory clearances had not yet been fully received.
Panic has taken hold of small investors, according to Montreal portfolio manager Stephen Takacsy of the firm Gestion Lester.
This financier is betting that the sale of Velan will materialize as planned. He explains that Lester had sold the majority of his shares of Velan earlier this summer for about $12.75. He claims to have taken advantage of the decline observed on Wednesday to rebuild a position in the title in the hope of making a quick substantial gain.
“There is always a risk that the deal will fall through, as there is with any deal, but we think the odds are very high that it will happen,” he said.
Stephen Takacsy is nevertheless surprised by the plunge in Velan’s action and expects a solution to be found. French subsidiaries could, for example, be sold to independent entities, he says. Guarantees may, according to him, be given by the purchaser concerning the installations, the employees and the technology. On the other hand, he wonders why France would oppose a sale to an American company. “It belongs to Canadians right now. What is the difference ? »
If some people think that Flowserve could in the future refuse to sell nuclear valves to China, for example, forced or not by Washington, Stephen Takacsy does not believe it. “What would that mean? Job losses in France because there would be less valve sales? Flowserve wants to buy Velan to make money, not to play politics. »
It was not possible on Wednesday to speak with a member of management at Velan.
