Rexnord to Buy Falk for $295 Million

A pair of century-old Milwaukee industrial firms will become one after 114-year-old Rexnord Corp. recently agreed to buy 113-year-old Falk Corp. for $295 million. The transaction is expected to be completed this summer.

The two companies are competitors in some fields: Rexnord makes gears, couplings, chains, bearings and other industrial components. Falk’s products include gear drives and couplings.

Rexnord is the bigger of the two companies, with 4,800 employees and 30 manufacturing plants worldwide. It recorded $800 million in sales in 2004, compared with $200 million for Falk Corp., which has approximately 1,100 employees in six countries.

“By combining two successful companies that have complementary products and technologies, we create a bigger, stronger business, with combined annual revenues in excess of $1 billion,” said Rexnord CEO Robert Hitt.

Rexnord is owned by Carlyle Group, a Washington, D.C., private equity group.

Rexnord’s products are used in plants and equipment in a wide range of industries. “Rexnord, in particular, is looking to grow,” said company spokesman Paul McAfee.

Since about 1968, Falk has been owned by Hamilton Sundstrand, a subsidiary of United Technologies Corp. Falk was founded as a brewery in 1856 and grew into the gear business in 1899.

United Technologies, based in Hartford, Conn., includes Hamilton Sundstrand aerospace products, Pratt & Whitney aircraft engines, Otis elevators, and Carrier heating and cooling systems.

Hamilton Sundstrand made the decision to sell Falk, said Hamilton spokeswoman Melissa Marsden.

“Falk is a profitable company; it’s just not core to our product line,” she said. “If you look at our other products, you will see that we specialize in things such as pumps, compressors and controls.”

Rexnord and Falk have manufacturing plants outside of the United States, and both companies face offshore competition in similar industries.

The key to this acquisition is the firms “saw an opportunity to be stronger together than apart,” McAfee said.

Uphill Battle: U.S. Manufacturing and
The Next Generation

“We still do a very, very poor job of educating our kids” in science and math, Intel CEO Craig R. Barrett recently told BusinessWeek. Compare high school graduates in the world’s top 25 countries, he said, and “an American kid is, on average, near the bottom 10 percent.”

The Organization for Economic Cooperation & Development’s Program for International Student Assessment recently ranked the math skills of U.S. 15-year-olds 24th among the 29 OECD countries. Three years ago, the U.S. ranked 18th. What does this mean for manufacturing?

“Without a technically skilled workforce, U.S. business won’t be able to compete globally,” said National Association of Manufacturers president John Engler.


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