425: Flowserve and Chart Industries Announce Merger of Equals to Form Industrial Process Powerhouse

Flowserve Corporation and Chart Industries, Inc. have agreed to combine in a merger of equals, aiming to establish a differentiated industrial process leader in flow and thermal management.

Summary

• Flowserve Corporation and Chart Industries, Inc. have entered into an agreement to combine in a merger of equals.
• The merger aims to create a differentiated industrial process leader specializing in flow and thermal management.
• Chart Industries is recognized for its leadership in thermal management, process design, and systems capabilities, offering products like compressors, heat exchangers, and cryogenic solutions across various industries including LNG, Industrial Gases, Energy, Chemicals, Mining, and Space Exploration.
• The combined entity will be capable of addressing the full customer lifecycle, from process design to aftermarket support, with a comprehensive suite of products, systems, and end-to-end solutions.
• The transaction is anticipated to close in Q4 2025, contingent upon approvals from shareholders of both Flowserve and Chart, as well as necessary regulatory approvals and other customary closing conditions.
• Until the transaction's completion, Flowserve and Chart will continue to operate as independent companies.

Sentiment

Score: 8

Explanation: The document conveys a highly positive and optimistic sentiment regarding the strategic merger of equals. It emphasizes complementary strengths, growth opportunities, and benefits for all stakeholders, despite acknowledging standard merger-related risks.

Positives

• The combination creates a truly differentiated industrial process leader in flow and thermal management.
• It represents a significant opportunity for the company, its associates, customers, and shareholders, positioning the entity for sustained growth and success.
• The businesses are highly complementary, with Flowserve's 3D strategy aligning naturally with Chart's focus on clean power, water, industrials, and food and beverage.
• The combined company will be able to address the full customer lifecycle, enhancing service and support capabilities.
• Increased exposure to diverse, high-growth end markets is expected to improve performance across various economic environments.
• The merger is anticipated to unlock new opportunities for professional development and growth for employees.

Risks

• Regulatory approvals may not be obtained, or may be subject to unanticipated conditions, limitations, or restrictions.
• Failure to receive required transaction-related approvals from Chart's stockholders and Flowserve's shareholders on a timely basis or at all.
• Potential delays in consummating the proposed merger transaction.
• Inability to successfully integrate the operations of Chart and Flowserve within the expected time period.
• Anticipated benefits and projected synergies of the proposed merger may not be realized or not realized within the expected timeframe.
• The possibility of competing offers or acquisition proposals being made.
• The occurrence of any event, change, or circumstance that could lead to the termination of the merger agreement, potentially requiring a termination fee.
• Risk that the anticipated tax treatment of the proposed merger transaction is not obtained.
• Unforeseen or unknown liabilities may arise.
• Challenges in obtaining customer, stockholder, regulatory, and other stakeholder approvals and support.
• Unexpected future capital expenditures may be required.
• Uncertainty regarding the combined company's ability to pay a quarterly dividend as expected.
• Potential litigation relating to the proposed merger transaction against Chart, Flowserve, or their respective directors.
• The transaction may be more expensive to complete than anticipated due to unexpected factors or events.
• The announcement, pendency, or completion of the proposed merger transaction could negatively affect business relationships and general business operations.
• Risks that the proposed merger transaction disrupts current plans and operations of Chart or Flowserve.
• Potential difficulties in employee retention as a result of the proposed merger transaction.
• Risk of disruption of management and ongoing business operations during the pendency of, or following, the proposed merger transaction.
• Uncertainties as to whether the proposed merger transaction will be consummated on the anticipated timing or at all, or if consummated, will achieve its anticipated economic benefits, including risks associated with third-party contracts.
• Changes in commodity prices.
• Negative effects of the announcement and the pendency or completion of the proposed merger transaction on the market price of Chart's or Flowserve's common stock and/or operating results.
• Rating agency actions and the ability to access shortand long-term debt markets on a timely and affordable basis.
• Various events that could disrupt operations, including severe weather, cybersecurity attacks, security threats, governmental response, and technological changes.
• Labor disputes, changes in labor costs, and labor difficulties.
• Effects of industry, market, economic, political, or regulatory conditions outside of Chart's or Flowserve's control.
• Legislative, regulatory, and economic developments targeting public companies in the industrial sector.
• Global supply chain disruptions and the current inflationary environment.
• Substantial dependence of Chart's and Flowserve's sales on the success of the energy, chemical, power generation, and general industries.
• Economic, political, and other risks associated with the international operations of Chart and Flowserve.
• Potential adverse effects resulting from the implementation of tariffs and related retaliatory actions and changes to or uncertainties related to tariffs and trade agreements.
• Other risks described in Item 1A Risk Factors of Chart's and Flowserve's most recent Annual Reports on Form 10-K and in subsequent SEC filings.

Future Outlook

The combined company is expected to emerge as a truly differentiated industrial process leader in flow and thermal management, positioned for sustained growth and success. The highly complementary nature of their businesses will enable them to address the full customer lifecycle and gain increased exposure to diverse, high-growth end markets, enhancing performance across various economic environments. The transaction is anticipated to close in Q4 2025, subject to shareholder and regulatory approvals.

Management Comments

• "This is a great day for all of us." Scott Rowe, President and Chief Executive Officer of Flowserve.
• "Flowserve and Chart Industries have agreed to combine in a merger of equals, creating a truly differentiated industrial process leader in flow and thermal management." Scott Rowe.
• "This is a significant opportunity for our company, associates, customers and shareholders – and one that will position us for continued growth and success for years to come." Scott Rowe.
• "This new chapter for our company would not be possible without the hard work you delivered over the last several years." Scott Rowe.
• "Today’s news should not impact anything in your day-to-day work. It’s more important than ever that we stay focused in supporting our customers and keep working toward our current priorities." Scott Rowe.
• "Our businesses are highly complementary, and Flowserve’s 3D strategy is a natural fit with Chart’s strategy to help produce clean power, water, industrials and food and beverage." Scott Rowe.
• "Working as one company, we will unlock new and exciting opportunities together, from the types of projects you work on to your own professional development and growth." Scott Rowe.
• "I want to express my tremendous gratitude for your dedication to Flowserve. Please keep doing your jobs and serving our customers every day – it’s the best way you can help." Scott Rowe.
• "This marks a transformative moment in our company’s journey, and I couldn’t be more excited about the incredible future we’re building together." Scott Rowe.

Industry Context

This merger combines Flowserve's established expertise in flow control (pumps, valves, seals) with Chart Industries' leadership in thermal management and cryogenic solutions. This strategic combination creates a more comprehensive offering across the industrial process sector, enabling the new entity to serve a broader range of customer needs from design to aftermarket support. The increased exposure to high-growth end markets such as LNG, industrial gases, and clean energy aligns with broader industry trends towards decarbonization and efficient industrial processes. Chart's recent successful integration of Howden in 2023 suggests a proven capability in executing large-scale acquisitions.

Management Changes

Corporate Governance

Legal Proceedings

• Potential litigation relating to the proposed merger transaction could be instituted against Chart, Flowserve, or their respective directors.

Stakeholder Impact

• **Shareholders**: The merger is presented as a significant opportunity for continued growth and success. The transaction is subject to shareholder approvals, and there is a risk of potential litigation related to the merger. The announcement may also impact the market price of their common stock.
• **Employees (Associates)**: The merger is expected to unlock new and exciting opportunities for professional development and growth. Management stated that day-to-day work should not be immediately impacted. However, there are risks of potential difficulties in employee retention and disruption of management and ongoing business operations during the pendency of, or following, the proposed merger.
• **Customers**: The combined company aims to address the full customer lifecycle from process design to aftermarket support. Management emphasizes staying focused on supporting customers. There is a risk of disruption to business relationships due to the merger.
• **Creditors**: The ability to access shortand long-term debt markets on a timely and affordable basis is mentioned as a risk factor, implying potential impact on creditors depending on market conditions and rating agency actions.

Next Steps

• Form an integration planning team comprising leaders from both Flowserve and Chart Industries.
• Announce the full executive leadership team for the combined company in the coming months.
• Reveal the new company name prior to a future date.
• The transaction is expected to close in Q4 2025, pending shareholder and regulatory approvals.
• Flowserve and Chart will remain separate, independently operating companies until the transaction closes.
• Relevant materials, including a registration statement on Form S-4 and a joint proxy statement/prospectus, will be filed with the SEC.
• A global town hall will be held at 9:30 AM US CDT to discuss the announcement.

Key Dates

Recommendation

Keywords

Flowserve, Chart Industries, Merger of Equals, Industrial Process, Flow Management, Thermal Management, Pumps, Valves, Seals, Compressors, Heat Exchangers, Cryogenic Solutions, LNG, Industrial Gases, Energy, Chemicals, Manufacturing, Corporate Governance, SEC Filing, Form 425