Montreal-based industrial valve manufacturer Velan has been slashed by tens of millions of dollars due to asbestos litigation.
Called to vote next month on the takeover bid for the American company Flowserve, Velan shareholders learned this week how litigation related to the presence of asbestos in the company’s products can affect the value of the company. ‘business.
Velan management recommends that its shareholders accept the $13 per share offer made in February by Flowserve, which gives Velan a market value of $280 million.
The document says Flowserve first submitted a conditional proposal last July at a price of $9.89 to $15.89 per share, depending on whether it would assume the asbestos obligations.
In August, Flowserve confirmed the upper range of its offer at a price of $12.89 to $15.89 per share. But in October, the proposal was revised to a range of $12.30 to $13.60 per share with the assumption of asbestos bonds.
Subsequent exchanges led to the presentation in November of a new, revised offer of $14 per share.
Additional discussions in December and January surrounding the valuation of the arrangement and the status of the due diligence documentation led to the final offer of $13 per share.
“The [asbestos] litigation costs seriously diminished the value of the transaction, by $5 to $6 per share,” comments portfolio manager Stephen Takacsy of Lester Management. According to the calculations of this expert, it is the equivalent of 100 to 130 million dollars of less value for shareholders.
Velan explains in its public filings that, like many other U.S. faucet manufacturers, two of its U.S. subsidiaries have been named as defendants in damages lawsuits brought on behalf of individuals seeking damages. for being exposed to asbestos.
Velan maintains that its products have been supplied in accordance with standard valve industry practices and customer specifications and have not been responsible for any asbestos-caused disease.
Despite the arguments it makes against the allegations, there is no guarantee that the company will prevail.
Asbestos-related legal fees have been accumulating for many years at Velan, and further lawsuits remain possible in the future. A total of 2,039 prosecutions were still pending at the end of the year ended this winter. Asbestos-related costs for this fiscal year were nearly $14 million. For the previous fiscal year, they reached 25 million.
Velan says it solicited 101 potential buyers last year as part of the sales process that led to the deal with Flowserve, and that 65 of them signed nondisclosure agreements. There were 11 offers in the first stage. Six potential buyers participated in the second stage and two, including Flowserve, made a definitive offer.
Founded in Montreal in 1950, Velan is a family-controlled, public company that employs approximately 1,647 people and operates factories in nine countries.
The Velan family is the controlling shareholder and sole holder of the multiple voting shares, which represent approximately 72% of the shares outstanding and 93% of the total voting rights attached to all shares.
