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Crane Co. To Buy MEI Conlux For $820 Million

Posted On: 12/21/2012

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TAGS: MEI acquisition, Crane acquisition, MEI Conlux Holdings Inc., MEI, vending, vending machine payment systems, banknote validators, bill acceptors, cashless vending, Crane Co., Crane Merchandising Systems, Crane Payment Solutions, Bain Capital, Advantage Partners, Michael Hayes, Max Mitchell, Kurt Gallo, Kiyoaki Takeda, Brad Ellis

STAMFORD, CT -- Crane Co. said it has signed an agreement to purchase 100% equity interest in payment systems giant MEI from Bain Capital and Advantage Partners for approximately $820 million on a cash- and debt-free basis. There is an MEI Conlux Holdings incorporated in the U.S. and another in Japan; together they are known as MEI.

The purchase price is 9.6 times greater than MEI's estimated 2012 EBITDA of $85 million. Crane Merchandising Systems, a unit of Crane Co., and MEI both develop and market payment solutions for unattended transaction systems in the vending and amusement sectors, as well as for transportation, gaming and retail, among other industries.

Crane said that it intends to finance the acquisition through a combination of cash on hand and additional debt. Commitments are in place to cover all financing needs to facilitate the transaction, which is expected to close in the second quarter of 2013.

MEI has customers in over 100 countries, employs 820 people and had sales of about $400 million in 2012. From 2009 to 2012, MEI's sales have grown at a 13% compound annual growth rate and EBITDA margins have increased to 21%. On a pro forma basis, the combined sales of MEI and CMS's payment products will reportedly be $575 million in 2012.


Until the completion of this acquisition, which is subject to regulatory approvals, MEI and CMS's payments businesses will operate independently under their existing management structures. Following the acquisition, MEI president Michael Hayes is expected to become president of the combined business, headquartered in Malvern, PA. Hayes will report to Crane executive vice-president and COO Max Mitchell. Kurt Gallo, Crane Payment Solutions president, will assume the COO role of the combined business, reporting to Hayes. Kiyoaki Takeda will continue as president of MEI Conlux Holdings in Japan.

MEI recently moved to a brand-new 60,000-sq.ft. building located seven miles from its former home in West Chester, PA. | SEE STORY

Crane Vending Solutions president Brad Ellis will continue to report to Max Mitchell. The division manufactures vending machines under the brands National Vendors, Dixie-Narco, Automatic Products, GPL and Stentorfield. The vending segment also includes Streamware, a business that develops and markets management software.

Crane's payment solutions business has annual sales of $175 million with operating profit margins of approximately 14%. Crane acquired NRI, a niche European coin validation and dispensing business, in 1985 as part of the acquisition of UniDynamics Corp. In recent years, Crane has invested more than $220 million to grow and broaden the payment solutions portion of its merchandising systems business segment. Cash Code, which specializes in applications for bill validation and dispensing devices, and Telequip, which provides coin-dispensing equipment, were both acquired in 2006, expanding the capabilities of NRI's coin handling business. Money Controls, acquired in late 2010, produces a broad range of payment solutions for coins and bills, and further broadened the scope and scale of the business.

Crane Co. president and chief executive Eric Fast said the MEI acquisition is consistent with the manufacturer's leadership position in niche markets. "MEI is an outstanding business and a leader in the payment solutions industry, with a solid product portfolio, excellent technology and sophisticated hardware and software," he said. "MEI materially strengthens our existing Payment Solutions business, which we have grown through three acquisitions beginning in 2006. Together we will be able to offer our customers a complete product suite utilizing MEI's leadership in bill validation and Crane's leadership in coin handling. We will have the global scale to capitalize on key growth opportunities, especially in emerging markets. In addition, we will expand our capabilities to drive innovation and facilitate the integration of bills, coins and cashless payment options to better serve customers worldwide. Excluding inventory step-up and one-time transaction costs, we expect MEI to be accretive to earnings within the first year of acquisition by approximately $0.25 per share, including $0.05 in synergies. We expect synergies to grow to $25 million annually on a pre-tax basis, or $0.30 per share in 2015."

In its 2012 third quarter, Crane Co.'s Merchandising Systems segment posted sales of $92.5 million, compared with $98.9 for the same period a year earlier. The 6% decline reflected lower sales of vending machines and, to a lesser extent, payment systems, the manufacturer said. | SEE STORY

Crane Merchandising Systems has offices in St. Louis, MO, and a manufacturing facility in Williston, SC. In 2011, Crane's five segments had net sales over $2.5 billion. Merchandising Systems' sales ranked No. 3 with sales of $373.9 million. Fluid Handling is the dominant segment, and reported almost $1.2 billion in sales in 2011.


Crane continues to expect 2012 EPS to be in the lower half of the previously communicated guidance range of $3.75 to $3.85, excluding Special Items. The EPS guidance includes $0.04 associated with the first half profits from discontinued operations, but excludes the following Special Items: the gain from the previously announced sale of two businesses ($0.33 per share) and repositioning costs ($0.26 per share). The 2012 EPS guidance also assumes a $0.05 per share benefit associated with a potential retroactive application of the Research and Development tax credit still under consideration in Congress. Full year 2012 free cash flow (cash provided by operating activities less capital spending) remains in a range of $150 million to $180 million.


Crane Co. describes itself as a diversified manufacturer of highly engineered industrial products. Founded in 1855, it provides products to customers in aerospace, electronics, hydrocarbon processing, petrochemical, chemical, power generation, automated retailing and transportation, among other markets. The company has five business segments: Aerospace & Electronics, Fluid Handling, Engineered Materials, Merchandising Systems and Controls.

MEI Conlux Holdings
 was founded by Mars in 1969 in response to the demand for better coin recognition technology for vending machines. In 2003, MEI acquired Conlux, the Japanese leader in coin mechanisms and bill validators. MEI was acquired by Advantage Partners and Bain Capital in 2006.