425: Flowserve and Chart Industries Announce All-Stock Merger of Equals to Create Industrial Process Technology Leader

Flowserve Corporation and Chart Industries, Inc. have entered into a definitive agreement for an all-stock merger of equals, forming a differentiated leader in industrial process technologies with an estimated enterprise value of $19 billion.

Summary

• Flowserve Corporation and Chart Industries, Inc. have entered into an all-stock merger of equals agreement, unanimously approved by both companies' boards of directors.
• Under the terms, Chart shareholders will receive 3.165 shares of Flowserve common stock for each share of Chart common stock owned.
• Following the transaction, Chart shareholders will own approximately 53.5% and Flowserve shareholders will own approximately 46.5% of the combined company on a fully diluted basis.
• The combined company is expected to have an enterprise value of approximately $19 billion, based on closing share prices as of June 3, 2025.
• On a combined LTM basis as of Q1 2025, the company generated net revenue of approximately $8.8 billion, with aftermarket services revenue contributing approximately $3.7 billion annually (42% of combined revenue).
• The merger is anticipated to generate approximately $300 million in annual cost synergies within three years, primarily from materials/procurement, roofline consolidation, organizational efficiencies, and elimination of duplicate public company costs.
• Commercial revenue synergies are expected to deliver an incremental 2% growth on the combined company's revenue over time.
• The transaction is expected to be meaningfully accretive to the combined company's Adjusted EPS in the first year following closing.
• The combined company will be headquartered in Dallas, TX, and is expected to close in the fourth quarter of 2025, subject to shareholder and regulatory approvals.

Sentiment

Score: 9

Explanation: The document conveys a highly positive outlook on the merger, emphasizing significant strategic benefits, substantial synergies, and strong financial accretion. The tone is confident and forward-looking, highlighting the creation of a diversified and resilient industrial leader. Risks mentioned are standard for M&A transactions and do not overshadow the projected benefits.

Positives

• Creates a differentiated leader in industrial process technologies with a scaled, high-performance, and global platform serving the full customer lifecycle.
• Enhances predictability, diversification, and resilience through market cycles with exposure to premium, high-growth end markets.
• Strengthens the attractive aftermarket franchise, driving recurring revenues to approximately $3.7 billion annually, representing 42% of combined revenue.
• Expected to generate approximately $300 million of annual cost synergies within three years, primarily from materials and procurement savings, roofline consolidation, organizational efficiencies, and elimination of duplicate public company costs.
• Anticipated to deliver commercial revenue synergies over time, representing at least an incremental 2% growth on the combined company's revenue.
• Expected to be meaningfully accretive to the combined company's Adjusted EPS in the first year following closing.
• Commitment to an investment grade balance sheet with an expected leverage ratio of 2.0x net debt to adjusted EBITDA at close.
• Generated $1.8 billion of cash flow (EBITDA less capital expenditures) over the 12 months ended March 31, 2025, supporting a balanced capital allocation strategy.
• Expects to pay a quarterly dividend consistent with Flowserve's historical per share payout levels.
• The combination would have reduced historical revenue volatility by approximately 380 basis points from 2019-2024 for the combined company relative to Flowserve standalone.

Negatives

• None explicitly stated as current negative results or conditions.

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.
• Potential delays in consummating the proposed merger transaction.
• Inability to integrate the operations of Chart and Flowserve in a successful manner or within the expected time period.
• The anticipated benefits and projected synergies of the proposed merger transaction may not be realized or not realized within the expected time period.
• Possibility that competing offers or acquisition proposals may be made.
• The occurrence of any event, change, or circumstance that could give rise to the termination of the merger agreement, potentially requiring Chart to pay a $250 million termination fee or Flowserve to pay a $215 million termination fee.
• Risks that the anticipated tax treatment of the proposed merger transaction is not obtained.
• Unforeseen or unknown liabilities.
• Challenges in obtaining customer, stockholder, regulatory, and other stakeholder approvals and support.
• Unexpected future capital expenditures.
• Uncertainties regarding the combined company's ability to pay a quarterly dividend as expected.
• Potential litigation relating to the proposed merger transaction that could be instituted 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 may negatively affect the parties' business relationships and business generally.
• Risks that the proposed merger transaction disrupts current plans and operations of Chart or Flowserve and potential difficulties in employee retention.
• 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 containing material consent, anti-assignment, transfer, or other provisions that may not be waived or satisfactorily resolved.
• Changes in commodity prices.
• Negative effects of the announcement, 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.
• The 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.
• The 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.

Future Outlook

The combined company is expected to be meaningfully accretive to Adjusted EPS in the first year following closing, achieve approximately $300 million in annual cost synergies within three years, and deliver incremental 2% revenue growth from commercial synergies over time. It aims for an investment-grade balance sheet and robust cash flow to support growth, deleveraging, and a consistent quarterly dividend, with the transaction expected to close in Q4 2025.

Management Comments

• Jill Evanko, President and CEO of Chart: "Combining Chart and Flowserve creates a comprehensive solutions platform, with the financial strength and resilience to continue driving growth and long-term value. Together we will provide a complete system of capabilities from front-end engineering design to mission critical equipment through aftermarket and servicing, delivering high-quality, value-added solutions to an expanded, global customer base. With robust cash flow, meaningful synergies, and greater aftermarket growth opportunities, the combined company will be ideally positioned to deliver superior and lasting value to its shareholders."
• Scott Rowe, President and CEO of Flowserve: "The merger will create a differentiated leader with the scale and resilience to meet the significant demand for comprehensive industrial process technologies and services. Charts and Flowserves highly complementary businesses will strengthen our ability to meet our customers needs, empower innovation and drive long-term, sustainable growth. The combined company will operate across diversified end markets with further exposure to premium, high-growth areas and a substantial aftermarket franchise – resulting in increased commercial opportunities. I am confident that together, we will capitalize on long-term value creation for our customers, partners, shareholders and combined global team."

Industry Context

This merger creates a formidable industrial process technology leader by combining Chart's expertise in thermal, cryogenic, and specialty solutions with Flowserve's leading capabilities in flow management. This strategic alignment positions the combined entity to capitalize on significant global demands in critical sectors such as electrification, clean water, global energy access, nuclear power, data center expansion (driven by AI), liquefied natural gas (LNG), carbon capture, and the upgrading of aging infrastructure. The resulting diversification across end markets (including General Industrial, LNG, Chemical, Power Generation, Hydrogen, Nuclear & Helium, and Specialty Markets/Water) and an expanded aftermarket franchise are expected to enhance resilience and reduce revenue volatility, creating a more stable and growth-oriented platform in the industrial sector.

Comparison to Industry Standards

• The combined company is projected to have reduced historical revenue volatility by approximately 380 basis points from 2019-2024, relative to Flowserve standalone, indicating improved stability compared to its historical performance.
• The document states that Flowserve and Chart's IT systems and intellectual property protection measures are consistent with 'industry standards' and 'commercially reasonable measures' respectively.
• No specific comparable companies, projects, or detailed industry benchmarks for financial performance metrics (e.g., revenue growth, EBITDA margins) are provided for direct comparison within the document.

Management Changes

Corporate Governance

Legal Proceedings

• Potential litigation relating to the proposed merger transaction that could be instituted against Chart, Flowserve, or their respective directors.
• Chart or Flowserve, as applicable, shall keep the other party reasonably informed, consult with the other party regarding, and give the other party the opportunity to participate in (but not control) the defense and settlement of any such litigation or other Action.
• Neither Chart, Flowserve, nor their respective Representatives shall cease to defend, consent to the entry of any judgment, or agree to or propose any settlement of any such litigation or other Action without the other party's prior written consent.

Related Party Transactions

• None disclosed beyond standard employment-related contracts and benefit plans, or those involving 5%+ beneficial owners, as of the agreement date, as explicitly stated in the representations and warranties of both Flowserve and Chart.

Stakeholder Impact

• **Shareholders**: Chart shareholders will receive 3.165 shares of Flowserve common stock for each Chart share, resulting in Chart shareholders owning 53.5% and Flowserve shareholders owning 46.5% of the combined company. The transaction is expected to be meaningfully accretive to combined Adjusted EPS in the first year, and the combined company expects to pay a quarterly dividend consistent with Flowserve's historical levels, aiming for long-term value creation.
• **Employees**: Continuing employees will be provided with no less favorable base salary/wage and target annual cash bonus opportunities for one year post-merger. Severance policies will be no less favorable, and commercially reasonable efforts will be made to provide service credit for eligibility, vesting, and other entitlements. The merger aims to expand career growth and opportunities.
• **Customers**: The combination will offer a comprehensive suite of world-class, differentiated solutions, expanded global reach, enhanced services, and integrated systems solutions across the full asset lifecycle, aiming to better meet customer needs and empower innovation.
• **Suppliers**: The merger is expected to generate significant cost synergies, including from materials and procurement savings, which may impact supplier relationships. The document notes a risk of disruption to business relationships generally.
• **Creditors**: The combined company is committed to maintaining an investment-grade balance sheet and will focus on debt repayment, including refinancing Chart's secured debt, which could impact existing creditors and future financing terms.

Next Steps

• Flowserve and Chart will jointly prepare and file a joint proxy statement and a registration statement on Form S-4 with the SEC.
• The Form S-4 must be declared effective by the SEC under the Securities Act.
• The Joint Proxy Statement will be distributed to shareholders of both Flowserve and Chart.
• Chart will convene a Stockholders Meeting to seek Chart Stockholder Approval for the merger.
• Flowserve will convene a Shareholders Meeting to seek Flowserve Share Issuance Approval and Flowserve Charter Amendment Approvals.
• Flowserve, as the sole stockholder of First Merger Sub and sole member of Second Merger Sub, will execute written consents approving the merger.
• Flowserve will use reasonable best efforts to cause the shares of Flowserve Common Stock and Preferred Stock to be issued as Merger Consideration to be approved for listing on NYSE.
• Chart and Flowserve will use reasonable best efforts to cause Chart Common Stock, Chart Preferred Stock, and any other Chart securities to be de-listed from NYSE and de-registered under the Exchange Act as soon as practicable after the First Effective Time.
• The combined company will assume a new name and brand following the closing of the transaction.
• If the Flowserve Name Change Approval is not received at the Flowserve Shareholders Meeting, the Combined Company will resubmit it at the next annual meeting of its shareholders.
• The transaction is expected to close in the fourth quarter of 2025.

Key Dates

Recommendation

Keywords

Merger, Acquisition, All-Stock Transaction, Industrial Process Technologies, Flow Management, Thermal Management, Synergies, Aftermarket Services, Energy, Chemical, Power Generation, Cryogenic, Compression, Pumps, Valves, Seals, Heat Exchangers, Carbon Capture, LNG, Hydrogen, Water Treatment, Corporate Governance, SEC Filing, Form 425