Astec (ASTE) Buys Power Flame To Strengthen Energy Group

The manufacturer and marketer of road building equipment, Astec Industries, Inc. (NASDAQ:ASTE) entered into an agreement to acquire all of the assets and certain liabilities of Power Flame, Inc. for $43 million.

Based in Parsons, KS, Power Flame manufactures gas, oil and combination gas/oil burners and combustion control systems designed for commercial, industrial and process applications. The company was established in 1948 and was acquired by Bill and Louisa Wiener in 1979.

The buyout is in sync with Astec’s strategy to grow, both organically and through acquisitions of strong companies that serve the Infrastructure, Aggregate and Mining and Energy industries. Power Flame’s strong market share, innovative technology and dependable quality products will boost Astec’s Energy Group’s performance.

The transaction is expected to close early in the third quarter, subject to final due diligence and customary closing conditions. Bill will remain the President of Power Flame even after the buyout.

On the energy side, Astec remains challenged in drilling and pumping equipment. Further, sales of Energy Group is expected to remain under pressure in the oil and natural gas industries as a lower oil prices have brought down the production and exploration of oil.

However, Astec is poised to benefit from acquisitions and the launch of new products. Extension of the long-term highway bill, further opportunity from pellet plants and strong infrastructure sales activity will also drive growth.

Moreover, Astec believes that its second-quarter results will remain unchanged sequentially. The company stated that revenue outlook for the balance of 2016 remains up 5% versus last year with expectations of improved bottom-line performance.

Astec currently has a Zacks Rank #2 (Buy).

Some stocks worth considering in the same sector are The Manitowoc Company, Inc. (NYSE:MTW) , Altra Industrial Motion Corp. (NASDAQ:AIMC) and Alamo Group, Inc. (NYSE:ALG) , each carrying the same Zacks Rank as Astec.