Sandvik Seeking Seco Tools Takeover

Cutting tool rivals would remain independent companies

Sandvik AB is offering an estimated $925 million to acquire the outstanding shares of Seco Tools AB, in a move to consolidate its strong market position in the metal-cutting business and narrow its administrative costs. Sandvik already holds 60.4% of Seco, and its offer to Seco shareholders is structured as an exchange of new Sandvik stock for shares of Seco.

Both Sandvik and Seco are among the largest manufactures of carbide-tipped tools for machining and metal cutting.

The offer comes in the context of a restructuring at Sandvik, which involves selling its medical technology business and reorganizing the remaining businesses into five units, rather than three. Sandvik identifies cutting tools as a core business that it intends to grow within a new business unit, Sandvik Machining Solutions.

”This is a natural step, with a clear industrial rationale, in line with our strategy to continue to strengthen our leading position in the global market for cutting tools,” according to Sandvik president and CEO Olof Faxander. “Our subsidiary Seco Tools has a strong brand that complements our total customer offering very well, and Seco Tools will remain independent as a separate brand within our new business area Sandvik Machining Solutions.

The acquisition is to be discussed and voted at an extraordinary general meeting of Sandvik shareholders, on December 12, in Stockholm. Seco Tools’ directors have unanimously approved the takeover, and Sandvik said two of Seco’s largest institutional shareholders “are positive toward the offer.”

Sandvik said it would keep the Seco Tools brand and organization, and that the management team would remain in place. The Seco product line would remain independently managed, in the same way that its Sandvik Coromant, Walter, and other brands are managed.

Faxander emphasized the organizational advantages to Seco Tools of being more closely held by Sandvik. “Bringing Walter from being a separately listed company into the Sandvik’s multi-brand model was a success and generated higher growth and profitability,” he explained. “Treating Seco Tools in a similar way will enable us to leverage on the total resources and investments in, for example, research and development, which will further strengthen our position in the increasing global competition.”

Reportedly, consolidating the Seco ownership will generate nearly $45 million in annual cost synergies.

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