Applied Industrial VP: 'Fluid Power is Big Growth Area'

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July 16, 2008

Applied Industrial VP: 'Fluid Power is Big Growth Area'

By Lindsay Young

Applied Industrial Technologies, Cleveland, OH, this week made one of its largest acquisitions in the U.S. fluid power market with an agreement to buy seven distribution businesses from Fluid Power Resource LLC. The purchase fits with Applied's strategy to continue building out its fluid power unit, according to Warren E. "Bud" Hoffner, who oversees Applied's fluid power group.

"It's just a great fit for Applied, and we've always thought that," Hoffner told MDM. "FPR ran these companies as standalone firms in each local or regional market. That fits very well with how we're structured."

The last large acquisition Applied made in the U.S. fluid power market was Spencer Industries Inc., Kent, WA, a regional fluid power distributor with about $65 million in sales. Applied bought Spencer in 2005. Applied also acquired Mexico's largest fluid power distributor VYCMEX S.A. de C.V. at the end of 2007.

"Fluid power is the fastest-growing part of our business," Hoffner said. He said Applied's fluid power sales will total more than $600 million after the recently announced acquisition closes. Applied's fluid power business group will have 67 sales and service facilities in U.S., Canada and Mexico.

The planned acquisition fills in geographical holes for the group in places like Michigan, the Carolinas and New England. "The most important thing is the 460 experienced fluid power associates coming on board to our company," Hoffner said.

The distributor plans to continue looking for acquisitions in fluid power. "We're looking for the right fit," Hoffner said. "Our perspective is very long-term."

The 19-location FPR acquisition includes distributors Bay Advanced Technologies, Carolina Fluid Components, DTS Fluid Power, FluidTech, Hughes HiTech, Hydro Air, and Power Systems. The businesses together employ 455 people and had 2007 sales of $244 million. Applied will leave the companies as standalone operations, while benefiting in key areas from economies of scale. "We keep these local names and teams together," Hoffner said. "We have just found that it works better."

The purchase price is $169 million in cash. The deal is expected to close by the end of this month.

"I really look forward to working with the team and investing in their future growth," Hoffner said. "We looked at this for a long time – for many years we knew this was a good fit for us."

For its fiscal year ended June 30, 2007, Applied posted sales of $2 billion.

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