Donaldson's Partmo Buyout Boosts Latin American Business

Minneapolis-based filtration company Donaldson Company, Inc. (NYSE:DCI) announced that it has completed the buyout of certain assets of Colombia-based replacement filter firm, Industrias Partmo, S.A., through its new wholly owned subsidiary – Filtros Partmo, S.A.S.

Engine Filter Business Boosted

Last July, Donaldson entered into a definitive agreement to acquire Industrias Partmo S.A. in a bid to solidify its replacement filter and liquid businesses. This acquisition is expected to supplement Donaldson’s Engine Products revenues by approximately $14 million.

Industrias Partmo has been in business over the past five decades. It has established itself as a premium manufacturer of avant-garde replacement air, lube and fuel filters for medium- and heavy-duty engines. Currently, about 250 employees work at its primary production site at Bucaramanga.

The Partmo acquisition marks the opening of the company’s first engine liquid filters production site in South America, thus boosting its engineering and manufacturing capabilities. Donaldson believes that Partmo’s product lines and distribution partners will prove to be major assets for enhancing its filter business in the region.

Market Expansion Drive Strong

Apart from strengthening the engine filter business, this buyout highlights Donaldson’s focus on fortifying its footprint in Latin America through strategic investments. The company has already penetrated deep into the region by opening distribution centers in Chile, Peru and Colombia. Also, with manufacturing operations in Mexico and Brazil, Donaldson is clearly vying for a dominant market share in the engine filter business.

In fact, Donaldson’s market expansion drive is part of its three-pronged growth strategy, which includes securing first-fit program wins, through the development of novel technology, for core business expansion. During second-quarter fiscal 2016, the company opened two distribution facilities in Colombia and a state-of-the-art facility in Poland. The company also revealed plans to extend production of liquid filter in Europe in the second half of the fiscal year to tap a larger customer base. It also has ambitious plans for the Chinese market by pursuing selective strategies.

Donaldson carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include H2O Innovation Inc. HEOFF, Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) and Landauer Inc. (NYSE:LDR) . While H2O Innovation sports a Zacks Rank #1 (Strong Buy), both Heritage-Crystal Clean and Landauer carry a Zacks Rank #2 (Buy).

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