Sun Hydraulics to Acquire Enovation Controls

Sun Hydraulics will acquire Enovation Controls' Power Controls and Vehicle Technologies businesses, providing it further diversification opportunities.

Sun Hydraulics Corporation has entered into an agreement with Enovation Controls LLC, an Oklahoma-based and privately held provider of electronic control, display and instrumentation solutions, to acquire its Power Controls (PC) and Vehicle Technologies (VT) lines of business. The acquisition is expected to close in 30 days, subject to regulatory approval and other customary closing conditions.

Key Transaction Highlights:

  • Acquisition value at initial consideration of $200M and additional earn-out potential of $50M over 27 months
  • Expected to be immediately accretive to Sun's 2017 earnings per share by $0.25-$0.35
  • Funded with cash on hand and cash available under Sun's revolving credit facility
  • Tax step-up basis benefit estimated at $35+M of value
  • Annual profit synergies of $5M expected by 2020

"With this acquisition, Sun acts on its commitment to our customers and shareholders. Our strategic focus is on innovation and complete system solutions. Enovation Controls' premium products support this focus and are an excellent fit with the Sun brand," says Wolfgang Dangel, Sun's President and CEO. "The PC and VT businesses are highly successful. They operate in some of the same industries Sun currently serves, while providing diversification opportunities in markets such as marine, power systems and recreational vehicles. Enovation Controls' products will complement Sun's current offerings in mobile and industrial applications as hydraulic systems increasingly incorporate electronics.

"Enovation Controls, co-founded by Frank Murphy III and Kennon Guglielmo, is among the fastest growing and most innovative electronic control and display companies globally," continues Dangel. "The acquisition of the PC and VT business lines provides Sun attractive new brands with proven appeal, including the highly respected Murphy brand, while infusing Sun with fresh ideas and expertise."

"Today marks the beginning of an exciting new chapter for Enovation Controls," said Murphy. "We have a deep respect for Sun Hydraulics. It is clear they share our commitment to addressing the needs of customers who build systems requiring both superior performance and reliability while incorporating cutting-edge technology. We are proud of the innovative company our team has built, and we are confident Sun will continue our strong tradition of stewardship given its reputation for leadership, global presence and resources."

Sun will maintain Enovation Controls as a separate standalone company, with Kennon Guglielmo remaining involved on the leadership team. The PC business will continue to provide electronic control systems, displays and customized instrumentation panels for power units, generator sets, off-highway equipment, and engine and pump instrumentation. The company's VT business will continue to provide electronic controls and infotainment solutions, solving complex problems in the recreational and off-highway vehicle and marine markets.

The acquired company will consist of approximately 300 employees located around the globe in the United States, England, Germany, India and China. Enovation Controls' two other lines of business, Natural Gas Production Controls and Engine Controls and Fuel Systems, will operate as a newly formed company not owned by Sun.

Sun's financial advisor for the transaction was Robert W. Baird & Co. Incorporated. Shumaker Loop & Kendrick, LLP acted as legal advisor.

Enovation's financial advisor for the transaction was Founders Investment Banking. Norton Rose Fulbright acted as legal advisor.

Companies in this article