Quaker Chemical to join the Philly 50

Posted: April 22, 2013

Two questions I've received recently about the Philly 50 list of public companies go something like this:

What will you do when a company gets acquired? Why isn't Quaker Chemical Corp. on the list?

I can address both with one sentence. Once Gardner Denver Inc. is acquired by KKR & Co. during the third quarter, Quaker Chemical will be its replacement.

Simple solution, right?

I didn't ignore Quaker Chemical in assembling the Philly 50. Its market value wasn't big enough to make the list.

The Conshohocken specialty chemical-maker had a market value of $745 million as of Friday, which would place it between DFC Global Corp. and Knoll Inc. on this week's list.

I like the idea of replacing one industrial company with another. Quaker Chemical is a prime example of a heavy manufacturer, producing rolling lubricants for steel and aluminum mills as well as machining and grinding compounds for metalworkers.

It may surprise some to learn that Quaker Chemical has been growing in such a gritty business recently. The company has increased net sales each year since Michael F. Barry became CEO in October 2008. Sales totaled $708.2 million in 2012 compared with $451.5 million in 2009. Net income also has grown to $47.4 million, or $3.63 per share, from $16.1 million, or $1.45 per share.

One reader lobbied for Quaker Chemical on the basis of its local employment. However, while the company certainly has a bigger local workforce than Gardner Denver - about 110 compared with about two dozen - Quaker Chemical is much smaller by most other measures.

Gardner Denver, which makes industrial compressors and pumps used in the oil fields, has a market capitalization of $3.7 billion and reported 2012 sales of $2.4 billion. Its global workforce numbers 6,400.

However, Gardner Denver obviously wasn't big enough to remain independent. Shortly after Gardner Denver CEO Barry L. Pennypacker resigned last July, it was clear the Tredyffin company was in play. ValueAct Capital, which owns a 5 percent stake, publicly called for the sale of the company.

A proxy statement filed with the Securities and Exchange Commission on April 15 outlines how the $3.7 billion deal with KKR came about and states that an unidentified "Party A" contacted Gardner Denver's chair July 24 about a "potential combination."

The proxy also makes clear that while Pennypacker was no longer running Gardner Denver, he was not uninvolved in the wheeling and dealing that led to KKR's winning bid of $76 per share. Pennypacker entered into a consulting agreement with KKR as of Oct. 12 that calls for him to receive $2 million in cash if the merger is completed. The proxy says that Gardner Denver's board was unaware of the payment amount until the proxy statement was prepared.

Contact Mike Armstrong

at 215-854-2980 or marmstrong@phillynews.com, or @PhillyInc on Twitter.

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