Faced with the impossibility of obtaining approval from France, the sale of the Montreal industrial valve manufacturer Velan to an American company fell through.
Velan announced in February that it had accepted an offer of $13 per share from Flowserve, a Texas company.
The proposed acquisition of Velan by Flowserve took a political turn due to Velan’s activities in France. Velan operates two subsidiaries in France (Segault and Velan SAS) and says it was informed verbally on Thursday that the office of the French Minister of the Economy refuses the sale of the two subsidiaries to Flowserve. The reasons justifying the French government’s decision were, however, not specified on Thursday by Velan and Flowserve.
In France, Velan notably manufactures valves for the nuclear sector.
Opposition from the French government therefore pushes Flowserve to abandon its purchase project.
Velan clarified on Thursday that French authorities are opposed to the transaction despite corrective measures and commitments proposed by Flowserve. Already postponed twice, the deadline to conclude the transaction was more recently set for October 7 as approval from the French government was still to be obtained.
“Although we are disappointed with the outcome of the proceedings and the decision of the French authorities, we remain confident in the future of Velan,” comments James Mannebach, chairman of the board of directors of Velan, in a press release.
Velan will continue its path independently, but James Mannebach assures that all strategic options Velan has to create value for all its stakeholders will continue to be explored.
Portfolio manager Stephen Takacsy, of the Montreal firm Gestion Lester, is “extremely surprised” by France’s decision. “It’s incredible that the French government could harm such a transaction. Segault is a small subsidiary of Velan and Flowserve was even willing to compromise,” he says. “The solution now is to sell the subsidiary in France separately to a French group, and to sell the rest of the company to another company. The family wants to sell, so Velan will continue to explore all options. »
Investors will react to the news this Friday, as Velan’s stock closed Thursday’s session at $11.01 on the Toronto Stock Exchange.
Controlled by the family of the late founder Karel Velan, Velan is worth nearly $240 million at current stock prices.
