Arcline tops KKR’s offer for Circor as bidding war intensifies

(Reuters) -Private equity firm Arcline Investment Management proposed to buy Circor International (NYSE:) for $1.8 billion including debt on Wednesday, topping a rival bid from KKR & Co (NYSE:) for the industrial machinery maker.

Arcline’s bidding war with KKR had already forced the latter to sweeten its deal with Circor to $1.7 billion from $1.6 billion. Arcline gave Circor until Thursday evening to respond to its latest offer. Circor did not respond to a request for comment on its next steps.

Circor shares closed 4.3% higher at $53.68 on Wednesday, between KKR’s $51-per-share deal and Arcline’s $57-per-share offer.

KKR said on Wednesday its deal would have no antitrust risks. Arcline’s funds, on the other hand, own a direct competitor of Circor called Fairbanks Morse Defense, a provider of diesel engines and equipment to the U.S. Navy, KKR said.

“This is particularly important in the current regulatory climate given heightened scrutiny around consolidation between competing suppliers of the defense industrial base,” the New York-based private equity firm said.

U.S. Representative Rob Wittman, chairman of the U.S. House tactical air and land forces subcommittee, tweeted that he had concerns about Arcline’s bid because it would lead to the merger of two “critical” U.S. valve production companies.

“At a time when we are expanding the submarine industrial base to meet future requirements, we need more information before deciding to support a valve consolidation proposal,” Wittman tweeted.

Were Circor to opt for a deal with Arcline, they would not be able to complete it until the second half of 2024, KKR said. It added that its deal would close in the fourth quarter of 2023. KKR also plans to offer Circor employees equity in the company after the buyout, as it does with many of its companies.

Circor had said on Tuesday that KKR offered more financing certainty as well as a clearer and faster path to antitrust approvals.

Arcline said its bid was supported by financing from BMO Capital Markets Corp and Bank of Montreal. KKR has said it has provided a full equity backstop for its deal, meaning it can finance it just with its own and its investors’ funds.

Orders at Circor, which makes flow-control products to help manage and control liquids and gases, rose 9% in its most recent quarter, reflecting demand for its services as it benefited from a recovery in the commercial aerospace market.