DIAMONDS ARE FOREVER

B. Alfa Laval AB (ALFA) agreed to buy Norwegian pumpmaker Frank Mohn AS for 13 billion kroner ($2.2 billion) to capture spending in offshore oil and gas drilling.

The all-cash transaction will add sales of 3.4 billion kroner from Frank Mohn's range of submerged pumping systems and an order intake of 6.1 billion kroner, with higher margins than the Lund, Sweden-based company's, Alfa Laval said today. The shares climbed as much as 5.3 percent to their highest since they began trading in 2002.

"The solid order backlog and stable historical operating margins over the business cycle give us financial comfort," Alfa Laval Chief Executive Officer Lars Renstrom said on a conference call. He said he expects a "significant increase" in sales this year and next due to the backlog of the company.

Renstrom said Alfa Laval had been tracking Frank Mohn for several years having earmarked the marine and offshore oil and gas markets as a strategic area of growth, to supplement its offering to industrial, food and medical clients. The purchase extends an acquisition drive to about 20 companies in five years, with combined sales of 7.5 billion kronor ($1.1 billion).

The Swedish company's shares traded 4.3 percent higher at 185.20 kronor as of 11:10 a.m. local time.

Alfa Laval will fund the purchase via existing credit facilities and a bridge loan, taking the net debt to earnings ratio to about 2.5 times. The Swedish company is expecting to get 120 million kroner in annual integration savings within three years.

SEB acted as financial adviser to Alfa Laval, with assistance from BA-HR on the legal side, and PricewaterhouseCoopers LLP on accounting and tax. Frank Mohn was advised by Saga Corporate Finance, with Advokatfirmaet Schjodt as a legal adviser and Ernst & Young LLP advising on accounting.