By Mia Shanley and Johannes Hellstrom
STOCKHOLM (Reuters) - Sweden's Atlas Copco
CEO Ronnie Leten said he first looked at buying Edwards in 2006, but in 2007 private equity firm CCMP bought it for 460 million pounds ($720 million), listing it last year and keeping 84 percent with its associate Unitas.
Edwards - the market leader in chemical and semiconductor industry pumps - is Atlas Copco's first big buy since 2007 when it acquired road-compactor maker Dynapac for almost $1 billion.
"It is a great segment to be in. It's a $6 billion market, and it is still growing," Leten said on a call with analysts.
"This project is a real growth project. Of course, there are cost synergies, but the main driving factor for us is to create synergies within sales and services from compressors and vacuums," said Leten, whose firm has more than 40,000 employees.
The deal, priced at a 24 percent premium to Edwards' close on Friday assuming the maximum offer, sent Atlas Copco shares up 1.4 percent compared with a broadly weaker Stockholm bourse <.OMXS30>. Edwards shares rose 18 percent to trade at $9.99 a share.
Edwards, whose competitors include Japan's Ebara <6361.T> and Gardner Denver in the United States, employs more than 3,200 in 20 countries and had revenues of 595 million pounds in 2012, or about 7 percent of Atlas' sales.
Revenues, however, were down from 701 million pounds in 2011 while operating earnings fell 30 percent to 114 million.
A third of Edwards' revenues come from the United States and more than half from Asia. Just under 30 percent of Atlas Copco's revenues are from Asia and Australia, 20 percent from North America and 30 percent from Europe.
According to Thomson Reuters data Atlas Copco will pay 7.2 times Edward's expected earnings before interest, tax, depreciation and amortization (EBITDA) for 2013. That compares with European industrial deals of about 7.8 times EBITDA this year and 10.5 times EBITDA for such deals in the United States.
Other large-scale engineering deals this year include France's Schneider Electric
Analysts said the acquisition made sense given Atlas has come under pressure from a weak mining industry, which has suffered as softer prices for commodities such as coal, copper and gold have raised doubts about future investment returns.
The Swedish firm's compressor and industrial businesses, which like mining and rock excavation accounts for roughly a third of sales, have fared better and tempered a fall in group order bookings in the second quarter.
"It is something which is quite clear that Atlas has intended to do - expand its business in surrounding disciplines," said Peter Frolen, an analyst at Handelsbanken. "The vacuum side is definitely a growth area for the company... this is going to generate revenue and cost synergies."
Folding in Edwards' revenues will take the contribution of the division to 43 percent of total sales, Leten said.
Atlas Copco said it would pay up to $10.50 per share for Edwards, including net debt, representing a 24 percent premium to Friday's closing price of $8.45.
Shareholders will initially receive $9.25 per share, plus an additional payment of up to $1.25 once Edwards' 2013 income statement is final, the company said.
Depending on the additional payment, the offer represents a premium of 11 to 26 percent to Edwards' 30-day average closing share price up to Friday's close, it said.
Danske said in a note that it was positive Atlas was doing a large acquisition and cutting back its exposure to mining. It still did not rule out an extra dividend for the year.
"M&A is an important part of our positive view of durable goods and we expect more deals to be made public in the second half of the year," it wrote.
The deal is scheduled to close in the first quarter.
(Editing by Louise Ireland)