Activist fund urges Tennant to merge with Danish company Nilfisk

A London-based firm that owns more than 5 percent of Tennant Co. is asking the Golden Valley-based maker of cleaning equipment and solutions to look at merging with the Danish company Nilfisk.

Tennant said the company's leadership and board "will carefully evaluate PrimeStone's views and look forward to discussing with all our shareholders our core strategy to continue driving earnings growth and shareholder value going forward."

PrimeStone Capital, in a filing with the Securities and Exchange Commission Wednesday, disclosed its investment in Tennant and also said it owns more than 5 percent of Nilfisk, which also manufactures cleaning equipment.

The active-fund manager wants Tennant to conduct a strategic review of a potential combination with Nilfisk, the filing said. PrimeStone said in its filing that it has discussed the possibility of a merger with both companies and also has done a thorough review of the industry, competitors and customers of both companies.

PrimeStone said in its presentation they believe Nilfisk's management, board of directors and shareholders would support a combination with Tennant.

Former senior partners of the Carlyle Group, one of the largest global alternative asset management groups, launched PrimeStone in December 2014 to make long-term investments in mid-cap public companies, primarily in Europe. They have a portfolio of more than 15 investments already.

The two companies, Tennant and Nilfisk, are no strangers to each other. They share similar vision, values and strategy, and while Nilfisk is headquartered in Denmark, it has significant operations in Minnesota. The two companies would be complementary with Tennant much stronger in the U.S. and Nilfisk much stronger in Europe.

Tennant had revenue of about $1 billion in 2016; Nilfisk's annual revenue is about $1.2 billion. A company with their combined revenue would be able to attract more analyst coverage, the filing said.

St. Paul-based investment advisory firm Mairs & Power has been a long-term investor in Tennant Co. and also owns more than 5 percent of its shares.

Mark Henneman, who becomes chairman and CEO of Mairs & Power on Jan. 1, acknowledged that Tennant has had some missteps recently. Tennant missed analysts' earnings expectations in the second and third quarters this year.

But Henneman thinks Tennant is well-managed and likes its long-term prospects.

"We feel very confident in our holdings in Tennant as a stand-alone company," Henneman said, although Mairs & Power would consider a combination.

Patrick Kennedy • 612-673-7926