Faced with the impossibility of obtaining approval from France, the sale of Montreal industrial valve manufacturer Velan to an American company failed.
Phelan announced in February that it had accepted an offer of $13 per share from Flowserve, a Texas company.
Flowserve’s proposed acquisition of Velan took a political turn due to Velan’s activities in France. Velan operates two subsidiaries in France (Segault and Velan SAS) and says it was informed verbally on Thursday that the French Economy Minister’s office refuses to sell the two subsidiaries to Flowserve. However, the reasons justifying the French government’s decision were not specified on Thursday by Vaillant and Flowserve.
In France, Vaillant specifically manufactures valves for the nuclear sector.
Therefore, opposition from the French government prompts Flowserve to abandon its procurement project.
While Vaillant and the Quebec Superior Court approved the deal in May, Flowserve’s top boss said at the beginning of August that the approval process was more difficult in France. He said it was a matter of national security and that Flowserve was working with the Department of Defense and the Department of Energy, among others.
Vaillant clarified on Thursday that French authorities oppose the deal despite the corrective measures and commitments proposed by Flowserve. The deadline to complete the deal has already been postponed twice, most recently set for October 7 as French government approval has not yet been obtained.
“Although we are disappointed with the outcome of the proceedings and the decision of the French authorities, we remain confident in Phelan’s future,” commented James Manibach, Chairman of Phelan, in a press release.
A very surprising decision.
Phelan will continue its journey independently, but James Manibach stresses that all strategic options Phelan has to create value for all stakeholders will continue to be considered.
Portfolio manager Steven Takashi, of Montreal-based Gestion Lister, said he was “extremely surprised” by France’s decision. “It is unbelievable that the French government could damage such a deal. Segault is a small subsidiary of Velan, and Flowserve was willing to compromise,” he says. “The solution now is to sell the subsidiary in France separately to a French group,” he says. And sell the rest of the company to another company. The family wants to sell, so Phelan will continue to explore all options. »
Investors will react to the news on Friday, as Velan stock closed Thursday’s session at $11.01 on the Toronto Stock Exchange.
Controlled by the family of late founder Karel Phelan, Phelan’s company is worth about $240 million at current stock prices.
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