Hubbell Incorporated (NYSE: HUBB) today announced that it has
entered into a definitive agreement to acquire Northern Star
Holdings, Inc. (commercially known as Systems Control), a portfolio
company of Comvest Partners, for $1.1 billion in cash, subject to
customary adjustments.
Systems Control is a leading manufacturer of substation control
and relay panels, as well as turnkey substation control building
solutions. These highly engineered offerings are mission-critical
to grid reliability, enabling utility customers to protect and
control substation infrastructure while detecting faults and
controlling the flow of electricity. Systems Control estimates 2024
sales of approximately $400 million.
Gerben Bakker, Hubbell’s Chairman, President and Chief Executive
Officer said, “This acquisition enhances Hubbell Utility Solutions’
industry-leading franchise across utility components,
communications and controls. Systems Control has a strong track
record of financial performance and is highly complementary to
Hubbell’s portfolio, enabling us to deliver additional value to our
core utility customers while enhancing our overall growth and
margin profile for shareholders.”
Greg Gumbs, President, Utility Solutions said, “Substation
automation is critical to upgrading aged infrastructure and
enabling the integration of renewables and electrification on the
grid. Systems Control has a proven value proposition, with leading
manufacturing quality and engineering expertise driving labor
savings for utility customers while enabling them to operate
critical infrastructure reliably and efficiently. We are excited to
welcome the Systems Control team to Hubbell.”
Transaction Financing and Approvals
The transaction is anticipated to close by the end of 2023,
subject to the satisfaction of customary closing conditions,
including receipt of required regulatory approvals. Hubbell plans
to finance the transaction with a combination of cash on hand and
debt.
Advisors
Morgan Stanley & Co. LLC is serving as financial advisor to
Hubbell, and Wachtell, Lipton, Rosen & Katz is serving as legal
advisor. Harris Williams LLC and Lincoln International LLC are
serving as financial advisors to Systems Control, and McDermott
Will & Emery LLP is serving as legal advisor.
Conference Call
Hubbell will webcast a conference call to discuss this
transaction, along with its third quarter 2023 earnings results,
tomorrow at 10:00 AM ET. The live audio of the conference call and
accompanying materials will be available and can be accessed by
visiting Hubbell's Events and Presentations section. You can also
access this information by going to www.hubbell.com and selecting
"Investors" from the options at the bottom of the page and then
"Events/Presentations" from the drop-down menu.
About Hubbell
Hubbell Incorporated is a leading manufacturer of utility and
electrical solutions enabling customers to operate critical
infrastructure safely, reliably and efficiently. With 2022 revenues
of $4.9 billion, Hubbell solutions electrify economies and energize
communities. The corporate headquarters is located in Shelton,
CT.
Forward-Looking Statements
Certain statements contained herein may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements regarding
anticipated growth, changes in operating results, market conditions
and economic conditions, and statements regarding the consummation
of the proposed transaction and the anticipated benefits to Hubbell
thereof, including the timing for the proposed transaction to
become accretive, the projected 2024 EBITDA multiple and Systems
Control estimated 2024 sales, are forward-looking statements. These
statements may be identified by the use of forward-looking words or
phrases such as “believe”, “expect”, “anticipate”, “intend”,
“depend”, “plan”, “estimated”, “predict”, “target”, “should”,
“could”, “may”, “subject to”, “continues”, “growing”,
“prospective”, “forecast”, “projected”, “purport”, “might”, “if”,
“contemplate”, “potential”, “pending”, “target”, “goals”,
“scheduled”, “will”, “will likely be”, and similar words and
phrases. Such forward-looking statements are based on our current
expectations and involve numerous assumptions, known and unknown
risks, uncertainties and other factors which may cause actual and
future performance or Hubbell’s achievements to be materially
different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such
factors include, but are not limited to: business conditions,
geopolitical conditions (including the wars in Ukraine and Israel,
as well as trade tensions with China) and changes in general
economic conditions, in particular industries, markets or
geographic regions, and ongoing softness in the residential
markets, as well the potential for a significant economic slowdown,
continued inflation, stagflation or recession, higher interest
rates, and higher energy costs; our ability to offset increases in
material and non-material costs through price recovery and volume
growth; effects of unfavorable foreign currency exchange rates and
the potential use of hedging instruments to hedge the exposure to
fluctuating rates of foreign currency exchange on inventory
purchases; the outcome of contingencies or costs compared to
amounts provided for such contingencies, including those with
respect to pension withdrawal liabilities; achieving sales levels
to meet revenue expectations; unexpected costs or charges, certain
of which may be outside Hubbell’s control; the effects of trade
tariffs, import quotas and other trade restrictions or actions
taken by the United States, United Kingdom, and other countries,
including changes in U.S. trade policies; failure to achieve
projected levels of efficiencies, cost savings and cost reduction
measures, including those expected as a result of our lean
initiatives and strategic sourcing plans, regulatory issues,
changes in tax laws including multijurisdictional implementation of
the Organisation for Economic Co-operation and Development's
comprehensive base erosion and profit shifting plan, or changes in
geographic profit mix affecting tax rates and availability of tax
incentives; the impact of and ability to fully integrate strategic
acquisitions, including the acquisitions of PCX Holding LLC, Ripley
Tools, LLC, Nooks Hill Road, LLC, REF Automation Limited, REF
Alabama Inc., EI Electronics LLC, and Indústria Eletromecânica
Balestro Ltda.; the impact of certain divestitures, including the
benefits and costs of, the sale of the Commercial and Industrial
Lighting business to GE Current; the ability to effectively develop
and introduce new products, expand into new markets and deploy
capital; Hubbell and System Controls’ ability to complete the
proposed transaction on the proposed terms or on the anticipated
timeline, or at all; failure to achieve the anticipated benefits
from the proposed transaction; other risks related to the
completion of the proposed transaction and actions related thereto,
including transaction costs and/or unknown or inestimable
liabilities; risk factors related to the integration of Systems
Control and the future opportunities and plans for the combined
company; and other factors described in our Securities and Exchange
Commission filings, including the “Business”, “Risk Factors”,
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations”, “Forward-Looking Statements” and
“Quantitative and Qualitative Disclosures about Market Risk”
sections in the Annual Report on Form 10-K for the year ended
December 31, 2022 and Quarterly Reports on Form 10-Q.
Non-GAAP Disclosure
We believe non-GAAP measures provide useful information to our
Board of Directors, management and investors regarding certain
trends relating to our financial condition and results of
operations. Our management uses non-GAAP measures to compare our
performance to that of prior periods for trend analyses and for
budgeting, forecasting and planning purposes, among others.
We do not consider non-GAAP measures an alternative to financial
measures determined in accordance with GAAP, rather they supplement
GAAP measures by providing additional information we believe to be
useful to our shareholders. The principal limitation of these
non-GAAP financial measures is they may exclude significant expense
and income items that are required by GAAP to be recognized in our
consolidated financial statements. In addition, they reflect the
exercise of management’s judgment about which expense and income
items are excluded or included in determining these non-GAAP
financial measures.
EBITDA multiple and adjusted EPS are non-GAAP measures. EBITDA
multiple represents a multiple of net income (loss) before interest
expense, provision for income taxes, depreciation and amortization.
Adjusted EPS represents GAAP diluted EPS adjusted for the impact of
certain items directly related to acquisitions and other
non-recurring items, including amortization and transaction and
integration costs. Reconciliations of the differences between these
non-GAAP measures and the corresponding GAAP measures are not
available without unreasonable effort due to potentially high
variability, complexity and low visibility as to the items that
would be excluded from the applicable GAAP measure in the relevant
future period, such as unusual gains and losses, fluctuations in
foreign currency exchange rates, the impact and timing of potential
acquisitions and divestitures, certain financing costs, and other
structural changes or their probable significance. Non-GAAP
financial measures should not be relied upon in evaluating the
financial condition, results of operations or future prospects of
Hubbell.
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