DXP Enterprises, Inc. Announces Acquisition of Pro-Seal, Inc.

Rhea-AI Summary

DXP Enterprises, Inc. (DXPE) completes the acquisition of Pro-Seal, enhancing its rotating equipment division. Pro-Seal, a leading distributor of pumping systems, adds scale, new geography, and capabilities to DXP. The acquisition aims to accelerate end market diversification, with Pro-Seal contributing approximately $19.9 million in sales and $1.5 million in adjusted EBITDA for the last twelve months. DXP's CEO, David Little, emphasizes the strategic importance of the acquisition, highlighting the growth opportunities and synergies it brings.

Insights

Market Research Analyst

DXP Enterprises' acquisition of Pro-Seal marks a strategic expansion, which is poised to enhance the company's market presence in the Great Lakes Region and Alaska. The deal not only broadens DXP's geographic footprint but also diversifies its end market exposure. This diversification is crucial for mitigating risks associated with market volatility and demand fluctuations in specific sectors. Moreover, the acquisition is a clear indication of DXP's commitment to growth through strategic acquisitions.

From a market research perspective, the integration of Pro-Seal's local expertise with DXP's existing scale could potentially result in operational synergies, leading to improved service offerings and customer satisfaction. The expected accretion to earnings suggests that the deal is financially favorable and could lead to enhanced shareholder value. However, it is important to monitor the post-acquisition integration process, as it can significantly impact the realization of these benefits.

Financial Analyst

Analyzing the financial aspects of this acquisition, Pro-Seal reported sales of approximately $19.9 million and an adjusted EBITDA of $1.5 million for the last twelve months ending December 31, 2023. These figures suggest a healthy financial performance which, when combined with DXP's resources, could lead to increased financial stability and growth potential for the enlarged entity. The use of cash from the balance sheet for funding the acquisition is indicative of DXP's strong liquidity position, which is a positive sign for investors.

Investors should consider the potential for earnings accretion as a positive indicator but remain aware of the costs and challenges associated with integrating a new company. It will be critical to evaluate future financial statements to assess the impact of the acquisition on DXP's profitability and to confirm the anticipated accretive effect on earnings.

M&A Legal Expert

The acquisition of Pro-Seal by DXP Enterprises involves legal considerations that ensure the transaction aligns with regulatory compliance and benefits both parties. The definitive agreement signed on March 1, 2024, will have undergone thorough due diligence to assess potential legal and financial risks. It is crucial for such agreements to address intellectual property rights, labor laws and potential antitrust issues to prevent legal complications post-acquisition.

While the legal details of the transaction are not disclosed, it is essential for stakeholders to understand that the success of the acquisition will also depend on the legal smoothness of the transition, including the seamless transfer of contracts, liabilities and regulatory approvals.

• Complements DXP’s rotating equipment division
• Adds scale, new geography, and enhanced capabilities
• Continues to Accelerate End Market Diversification

HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. (NASDAQ: DXPE) today announced that it has completed the acquisition of Pro-Seal, Inc. (“Pro-Seal”). Founded in 1987, Pro-Seal is headquartered in Pontiac, Michigan and operates out of two locations servicing the Great Lakes Region of the U.S. and all of Alaska.

Pro-Seal is a leading distributor of pumping systems, fluid sealing and related seal support systems and other industrial pumping equipment and services and lubricants. DXP funded the acquisition with cash from the balance sheet.

“We are pleased to announce the acquisition of Pro-Seal and welcome the employees of Pro-Seal to the DXP team. With Pro-Seal, we continue to build on our strategy of providing a breadth of technical products and services on the regional and local level. With the closing of Pro-Seal, we have started fiscal 2024 with three acquisitions and each company provides DXP with exceptional management teams that enhance our ability to collaborate and serve our customers, vendors, and other stakeholders. These acquisitions are consistent with our growth strategy and demonstrate our commitment to expanding DXP as well as maintaining our leading position as the largest distributor of rotating equipment in North America,” commented David Little, Chairman, and Chief Executive Officer of DXP.

The signing of the definitive agreement occurred on March 1, 2024. Sales and adjusted EBITDA for Pro-Seal for the last twelve months ending December 31, 2023, were approximately $19.9 million and $1.5 million, respectively. Adjusted EBITDA was calculated as income before tax, plus interest, plus depreciation and amortization, plus non-recurring items.

"Pro-Seal will provide DXP with additional geographic territory and enhanced end market mix. Pro-Seal is a unique, well-run business focused on providing value-added service to its customers," added David Little.

Kent Yee, Chief Financial Officer, stated "Pro-Seal complements DXP’s end markets and provides entry into a geographic region we have not historically served as well as adding scale for us in Alaska. Pro-Seal’s local market expertise combined with DXP’s size and scale will help us provide better customer solutions. We anticipate this acquisition to be accretive to earnings and further expand our Rotating Equipment division. This transaction will be positive for Pro-Seal and DXP’s customers, employees, and shareholders."

About DXP Enterprises, Inc.

DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico, and Dubai. DXP provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production ("MROP") services that emphasize and utilize DXP’s vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services. DXP's breadth of MROP products and service solutions allows DXP to be flexible and customer-driven, creating competitive advantages for our customers. DXP’s business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services. For more information, go to www.dxpe.com.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made by or to be made by the Company) contains statements that are forward-looking. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future; and accordingly, such results may differ from those expressed in any forward-looking statement made by or on behalf of the Company. These risks and uncertainties include but are not limited to; ability to obtain needed capital, dependence on existing management, leverage, and debt service, domestic or global economic conditions, and changes in customer preferences and attitudes. In some cases, you can identify forward-looking statements by terminology such as, but not limited to, “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or the negative of such terms or other comparable terminology. For more information, review the Company’s filings with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240305799104/en/

Kent Yee

Senior Vice President CFO

713-996-4700 – www.dxpe.com

Source: DXP Enterprises, Inc.

FAQ

What company did DXP Enterprises (DXPE) acquire?

DXP Enterprises acquired Pro-Seal, a leading distributor of pumping systems.

Where is Pro-Seal headquartered?

Pro-Seal is headquartered in Pontiac, Michigan, and operates in the Great Lakes Region of the U.S. and Alaska.

How was the acquisition of Pro-Seal funded?

DXP funded the acquisition of Pro-Seal with cash from the balance sheet.

What were the sales and adjusted EBITDA figures for Pro-Seal in the last twelve months?

Pro-Seal reported approximately $19.9 million in sales and $1.5 million in adjusted EBITDA for the last twelve months ending December 31, 2023.

Who commented on the acquisition of Pro-Seal?

David Little, the Chairman, and CEO of DXP, commented on the acquisition of Pro-Seal.