Donaldson Co. agreed Thursday to buy a gas-turbine filter maker in the United Arab Emirates that generates just $22 million in annual revenues but offers sizable growth potential and much-desired geographic diversity.
The purchase of Northern Technical will give Bloomington-based Donaldson a new perch from which to manage its existing Europe, Middle East and African gas turbine business.
Not only is Northern Technical the largest manufacturer of air filter intake systems for gas turbines in the Middle East, but the Middle East is the world's largest market for gas turbines.
Donaldson CEO Bill Cook was in Abu Dhabi early Thursday to sign the purchase agreement, terms of which were not disclosed. The deal is expected to close next month following regulatory approval.
"The acquisition of Northern Technical reinforces our commitment to growth with a company that is an excellent strategic fit with our existing gas turbine products business," Tod Carpenter, Donaldson's chief operating officer, said.
Northern Technical gives Donaldson more business in the high-growth region and comes with a large and highly coveted replacement filter business for gas turbines in power plants and factories. Donaldson mostly provides filters for new gas-turbine products, despite the fact that replacement parts are more profitable.
Donaldson Assistant Treasurer Rich Sheffer also noted that Northern Technical is well respected in the industry for its unique product line, which includes static panel filters that Donaldson currently doesn't make. "So this deal ticks off all three boxes, growth, geographic diversity and product diversity," Sheffer said.
The acquisition of Northern Technical helps fatten one of Donaldson's smallest divisions. Gas turbine products contributed just $233 million toward Donaldson's 2013 sales of $2.4 billion.
In May, Donaldson reported that its gas turbine product shipments fell 40 percent during its fiscal third quarter and were expected to be down roughly 29 percent for the full year. Cook told analysts in May that the sector is expected to rebound in 2015.
Donaldson releases results for the fiscal fourth quarter and full year on Aug. 27.
Dee DePass • 612-673-7725