HOUSTON (AP) -- Dresser-Rand Group Inc. said Thursday it has agreed to acquire Spanish diesel and gas engine supplier Grupo Guascor SL for $690 million in cash and stock, plus the assumption of $172 million in debt.
The acquisition is expected to close in the second quarter.
"We view this as an outstanding strategic fit and a very compelling financial opportunity that we expect will benefit clients, stockholders and employees of both companies," said Vince Volpe, Dresser-Rand's president and chief executive.
Dresser-Rand, which makes rotating equipment, said it expects to generate returns in excess of its cost of capital from the combination of the two companies' technologies of at least 5 cents a share this year and 40 cents a share in 2012.
Under the terms of the deal, a significant portion of the purchase price will be paid in Dresser-Rand shares.
The company said it intends to buy an equivalent number of shares in a share-buyback program, making the deal essentially a cash transaction.
Dresser-Rand will pay the sellers about $283 million in cash and issue roughly 5 million common shares.
The number of shares issued is based on a volume-weighted closing price of $46.75 a share for the 20 trading days prior to March 1.
In addition, the company intends to buy back $130 million common shares to complete a previously authorized $200 million share buyback program.
The company intends to raise about $330 million of term loan financing to help fund the share buyback.
It also plans to boost the size of its revolving credit facility by $100 million to $600 million and extend the due date to 2016.
Dresser-Rand shares ended the regular session up 87 cents to $50.40.
