8-K: Atmus to Acquire Koch Filter, Expanding Air Filtration

Atmus Filtration Technologies announced a definitive agreement to acquire Koch Filter Corporation for $450 million in cash, expanding its industrial air filtration market presence.

Summary

• Atmus Filtration Technologies Inc. (Atmus) has entered into a definitive agreement to acquire Koch Filter Corporation (Koch Filter) for $450 million in cash, subject to customary adjustments.
• Koch Filter, a manufacturer of essential air filtration solutions, generated $156 million in revenue for its fiscal year ended September 30, 2025.
• The purchase price represents a 13.9x multiple based on Koch Filter's Adjusted EBITDA for the 2025 fiscal year.
• When adjusted for the present value of expected tax benefits and cost synergies, the net transaction value is approximately $395 million, representing a 10.9x multiple.
• The transaction is expected to be accretive to Atmus's Adjusted EPS and Adjusted EBITDA margin in 2026.
• Atmus anticipates achieving a high-single-digit Return on Invested Capital (ROIC) by 2028.
• The acquisition is expected to close in the first quarter of 2026, subject to customary closing conditions, including regulatory approvals.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the strategic expansion into growing markets, expected financial accretion, and strong ROIC projections. However, the reliance on non-GAAP figures and standard acquisition risks temper the enthusiasm, preventing a 'strong buy' signal without further due diligence on the integration and synergy realization.

Positives

• The acquisition accelerates Atmus's growth by expanding into the industrial air filtration market.
• Provides access to growing end-markets, including industrial and commercial HVAC, data centers, and power generation.
• Koch Filter brings deep, established customer relationships, extensive industry experience, and a leading portfolio of consumable mission-critical products.
• Combines Koch Filter's strengths with Atmus's global footprint and expertise in media design to unlock growth opportunities.
• The transaction is expected to be accretive to Atmus's Adjusted EPS and Adjusted EBITDA margin in 2026.
• Anticipated high-single-digit ROIC by 2028 indicates strong long-term value creation potential.

Negatives

• The purchase price multiple of 13.9x based on Koch Filter's Adjusted EBITDA (10.9x after tax benefits and synergies) is a significant valuation.
• Koch Filter's Adjusted EBITDA is a non-GAAP financial measure, prepared by Koch Filter, and has not been calculated in accordance with SEC pro forma rules or audited, which introduces a degree of uncertainty.
• The acquisition is subject to customary closing conditions, including regulatory approvals, which could delay or prevent the transaction.
• Buyer's sole remedy for any post-closing Purchase Price Decrease is limited to the Escrow Amount of $1.45 million, which is a small fraction of the total purchase price.

Risks

• Ability to timely close on the transaction, including satisfaction of customary closing conditions such as the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act).
• Ability to finance the transaction, which includes potential upsizing of Atmus's credit facility.
• Realization of the expected financial performance of Koch Filter post-acquisition.
• Achievement of anticipated cost synergies from the transaction.
• Realization of estimated tax benefits from the transaction.
• Changes in global, regional, or local economic, business, competitive, market, regulatory, and other factors, many of which are beyond Atmus's control, could materially affect actual results.
• Risks and uncertainties reflected in Atmus's Annual Report on Form 10-K for fiscal year ended December 31, 2024, and Quarterly Report on Form 10-Q for fiscal quarter ended September 30, 2025.

Future Outlook

Atmus expects the acquisition of Koch Filter to accelerate its growth by expanding into the industrial air filtration market and related growing end-markets. The transaction is projected to be accretive to Atmus's Adjusted EPS and Adjusted EBITDA margin in 2026, with a high-single-digit ROIC anticipated by 2028. The company aims to unlock further growth opportunities by combining Koch Filter's established customer relationships and product portfolio with Atmus's global footprint and media design expertise.

Management Comments

• "The acquisition of Koch Filter will accelerate Atmus growth by expanding into the industrial air filtration market, including the growing industrial and commercial HVAC, data center and power generation end-markets," said Steph Disher, Chief Executive Officer of Atmus.
• "The Koch Filter team brings to Atmus deep, established customer relationships, extensive industry experience and a leading portfolio of consumable mission-critical products. Combining these strengths with our global footprint and expertise in media design positions our company to unlock growth opportunities."

Industry Context

This acquisition positions Atmus to capitalize on the growing demand within the industrial air filtration sector, particularly in critical infrastructure areas like commercial and industrial HVAC, data centers, and power generation. These markets are experiencing robust growth driven by increasing regulatory requirements for air quality, technological advancements, and the expansion of digital infrastructure. By integrating Koch Filter's specialized portfolio and customer base, Atmus aims to strengthen its competitive standing and diversify its revenue streams beyond its traditional truck, bus, agriculture, construction, mining, and marine markets.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess the acquisition's financial metrics against global benchmarks. The valuation multiples (13.9x Adjusted EBITDA, 10.9x adjusted) would typically be evaluated against recent M&A transactions in the industrial filtration or specialized HVAC components sectors, considering market conditions and the strategic value of market entry and synergy potential.
• The expected high-single-digit ROIC by 2028 suggests a return profile that would need to be benchmarked against Atmus's cost of capital and average returns in the filtration industry to determine its attractiveness.

Corporate Governance

Related Party Transactions

• Product Purchase and Supply Agreement (ASC Supply Agreement) to be entered into between Koch Filter and Air System Components, Inc.
• Product Purchase and Supply Agreement (Seller Supply Agreement) to be entered into between Koch Filter and Air Distribution Technologies, Inc. (Seller).
• Transition Services Agreement to be entered into among Buyer, Seller, and Koch Filter.
• IP Transfer Agreement to be entered into between Koch Filter and IP Holdco (Air Distribution Technologies IP, LLC).
• Trademark License Agreement to be entered into between Koch Filter and IP Holdco.

Stakeholder Impact

• **Shareholders (Atmus):** Potential for value creation through strategic expansion, revenue growth, and expected accretion to EPS and EBITDA margin, along with a high-single-digit ROIC.
• **Employees (Koch Filter):** Continuity of employment for Post-Transaction Employees with comparable base compensation and target cash bonus opportunities for 12 months post-closing. Service credit for eligibility and vesting in Buyer Plans, and certain waivers for health plans. Non-solicitation clauses protect employee base.
• **Customers (Koch Filter):** Expected continuity of product offerings and service, potentially enhanced by Atmus's global footprint and media design expertise.
• **Suppliers (Koch Filter):** Continuation of relationships, with specific supply agreements in place with related parties.
• **Creditors (Atmus):** Potential increase in borrowings under Atmus's credit facility to fund the acquisition.

Next Steps

• Satisfy or waive customary closing conditions, including regulatory approvals under the HSR Act.
• Complete the transaction, expected in the first quarter of 2026.
• Integrate Koch Filter Corporation into Atmus's operations.
• Realize anticipated cost synergies and tax benefits.
• Achieve expected accretion to Adjusted EPS and Adjusted EBITDA margin in 2026.
• Work towards achieving high-single-digit ROIC by 2028.

Key Dates

Recommendation

The acquisition is a strategically sound move for Atmus, expanding its market reach into growing industrial air filtration sectors and promising financial accretion. However, the valuation multiples are substantial, and the reliance on unaudited non-GAAP figures for Koch Filter introduces a degree of uncertainty. While the long-term outlook appears positive with expected ROIC, the immediate impact and successful integration carry inherent risks. A 'hold' recommendation reflects the positive strategic direction and expected financial benefits, balanced against the execution risks and the need for further clarity on integration and synergy realization.

Keywords

Filtration, Air Filtration, HVAC, Data Centers, Power Generation, Acquisition, M&A, Atmus Filtration Technologies, Koch Filter Corporation, Industrial Market