Atlas Copco (IW 1000/325), the world’s largest maker of industrial compressors, plans to split into two listed companies in a move that will see the departure of its longstanding Chief Executive Officer Ronnie Leten and could spark takeover interest.
A newly created company with sales of about 28 billion kronor (US$3.1 billion) will focus on mining and construction tools, and will be spun off to shareholders in a tax-free distribution, the Stockholm-based company said in a statement Monday. Under the plan to be put to shareholders next year, Atlas Copco will retain the compressor and vacuum businesses that have revenue of 74 billion kronor in the year through last Sept. 30.
“The new company is a business that a large player like Caterpillar or Komatsu might be interested in buying,” Swedbank analyst Anders Roslund said by phone. “I don’t think that’s imminent, but it’s an interesting and well-run business.”
The move comes as CEO Leten was aiming to refocus Atlas Copco on products with better profitability and growth opportunities. The company and Nordic peers like Sandvik AB and Metso Oyj have long suffered a downturn in sales to miners as falling commodity prices crimped their investments. Atlas Copco will effectively be spinning off the mining and construction-equipment business that has weathered the downturn better than competitors, Roslund said.
“The board and management believe that long-term shareholder value will be created,” Chairman Hans Stråberg said in the statement. “Both businesses are global leaders in their respective fields and will benefit from a more focused management responsibility.”
Atlas Copco shares rose 0.4% to 280.20 kronor as of 10:30 a.m. in Stockholm, giving a market capitalization of 337 billion kronor.
During the 7 1/2 years of Belgium-born Leten’s tenure at the helm, Atlas Copco’s share price increased more than three fold. He is leaving at his own request in April, according to a separate statement, and will be replaced by Mats Rahmstrom, a Swede who is currently a senior executive vice president and head of the industrial technique business.
The appointment of Rahmstrom is positive as the industrial technique division “has been a very strong unit,” Roslund said.
By Niclas Rolander