nVent Sells Raychem, Tracer, NuHeat and Pyrotenax

Back in May it was reported that nVent was soliciting bids for its Thermal management division. News releases shared that the division’s 2023 revenues were $595 million and that it’s EBITDA was approximately $150 million, for a 25% EBITDA margin. A short three months later, it was announced last week that nVent sold the division to Brookfield Asset Management.

nVent Announces Agreement to Sell Thermal Management Business

nVent’s press release shared:

• Transaction creates a more focused nVent portfolio, a global leader in electrical connection and protection solutions
• All-cash transaction valued at $1.7 billion, subject to customary closing adjustments
• nVent will discuss the transaction during its second quarter earnings conference call on Tuesday, August 6 at 9:00 a.m.

nVent Electric plc (NYSE: NVT) (“nVent”), a global leader in electrical connection and protection solutions, today announced that it has entered into a definitive agreement to sell its Thermal Management business (“Thermal Management”), which includes the industry-leading RAYCHEM and TRACER brands, to funds managed by Brookfield Asset Management for a cash purchase price of $1.7 billion, subject to customary closing adjustments.

With 2023 sales of $595 million and approximately 1,700 employees around the world, Thermal Management is a leader in mission critical electrical thermal solutions. The sale will enable Thermal Management to further build on its leading positions and differentiated solutions to drive growth across its verticals and expand with the energy transition.

“Thermal Management is a leader in electric heat management solutions with a strong, experienced team that is focused on delivering innovative solutions to customers,” said nVent Chair and CEO Beth Wozniak. “Consistent with our strategy, the sale represents a significant step to nVent becoming a higher growth and more focused electrical connection and protection leader, well positioned with the megatrends of electrification, sustainability and digitalization.”

nVent expects net after-tax proceeds from the transaction to be approximately $1.4 billion and intends to use the proceeds for acquisitions and share repurchases.

The transaction is expected to close by early 2025.

Additional Insights

• Other brands under the nVent thermal division that are part of this sale include – NUHEAT and PYROTENAX.
• For reps and distributors, there are no changes at this time. A business continuity / transition plan has been negotiated to ensure no business disruptions.
• While Brookfield is an asset management firm and has a private equity group, it should not be anticipated that this is a “buy, ‘streamline / change’, and flip” scenario with a quick exit planned. Brookfield’s Asset Management group has five segments. One is private equity. Others are Renewable Power & Transition and another is Infrastructure (plus Real Estate and Credit.) It is unknown which group this acquisition will be under but, their Infrastructure group is one of the world’s largest infrastructure investor with over $192 billion under management. The PE group has $129 billion under management.
• From an “asset” and ownership viewpoint, any division within a company, especially a publicly held company, is considered an asset that is subject to divestiture. Under Brookfield assumes ownership and determines how to best optimize this new “asset”, which could be a growth strategy or could be an operations / profit improvement play or could be both, the people will remain the same for a bit. When companies are sold to other “strategic” buyers with incumbent personnel, that’s when staff (especially regional management) on both sides get concerned.

So, what to do with the proceeds. After all, $1.7 billion, after paying off any debt associated with the business, s significant. nVent could:

• Use some / all of the proceeds to repurchase shares, which has some return to shareholders but doesn’t really help the business grow.
• Allocate some / all of the monies to pay down debt associated with the ECM Industries, Trachte and other acquisitions. Remember, the ECM deal was for $1.1 billion.
• Utilize some / all proceeds to continue its purchasing spree and seek an additional electrical acquisition (or multiple).
• Invest in its existing businesses, if necessary.

nVent took a non-core asset and turned it into a liquid asset, giving the company much flexibility.