Alfa Laval AB - Changes in the 1990s and Beyond

Changes in the 1990s and Beyond

While Alfa Laval (the hyphen in the company's named was dropped in 1993) pursued growth in the 1990s, the company dealt with several major changes. The first came in 1991, when Switzerland-based Tetra Pak Group made a $2.68 billion offer for the company. The Tetra Pak offer was attractive to Alfa Laval, largely due to the recent fall in its profits. Indeed, according to a 1991 Wall Street Journal article, "The union would spawn one of the world's biggest producers of food packaging and processing equipment."

After the takeover was announced, anti-competition concerns led to an investigation by the European Commission. The two companies agreed to various concessions and were eventually allowed to complete the transaction. In 1993, Alfa Laval was reorganized as an independent industrial group within the Tetra Laval group. Tetra Pak took over the company's liquid food processing business while farm equipment and related units were organized into a new division, Alfa Laval Agri.

Under its new parent, Alfa Laval spent the latter half of the decade working to develop new products. Among those was a new oil treatment system used on board ships. The ThinkTop Separation Unit and Control & Indication units were launched in 1999 and were considered some of the industry's most advanced automated valve control systems.

Another major change was on the horizon for Alfa Laval as it planned to enter the 21st century. Charterhouse Development Capital made a SEK 14.5 billion offer for the company after Tetra Laval put the firm up for sale in 1999. The sale failed to come to fruition, leaving Alfa Laval's future hanging in the balance. UBS Capital made an offer for the firm, but again buyout talks were terminated after UBS determined that Tetra Laval's asking price was too high. Finally, Industri Kapital 2000 Ltd. agreed to acquire a controlling interest Alfa Laval in 2000 in one of the largest Scandinavian management buyout campaigns in history. Under Industri Kapital, Alfa Laval focused on strengthening its Separation, Heat Transfer, and Fluid Handling business units.

After operating as a private company for over ten years, Alfa Laval re-listed on the Stockholm Stock Exchange on May 17, 2002. Industri Kapital CEO Bjvrn Savnen commented on the move in an April 2002 efinancialnews.com article, stating, "We have been very pleased with Alfa Laval's performance during our ownership. Already at the time of our investment we saw a listing of the company as a logical continuation of the company's future development." Alfa Laval CEO Sigge Haraldsson agreed, adding, "For us the IPO means that our financial position will be strengthened, allowing for additional growth and expansion."

Fueled by the offering, Alfa Laval made two key purchases in 2003. The firm of bioKinetics, a division of Kinetics Groups Inc., was added to the company's holdings and gave it a foothold in the high-tech integrated process solutions industry that served the biotech and pharmaceutical markets. Alfa Laval also acquired the Toftejorg Group, a leading Denmark-based tank cleaning equipment manufacturer. In addition, the company developed AlfaNova that year, a compact heat exchanger that was able to withstand high temperatures and pressures. At the same time, Industri Kapital reduced its stake in the firm from 26.9 percent to 17.9 percent.

The company expected to continue its growth in the years to come. Its business strategy was focused on six areas: the growth of its current products and services, market-driven research and development, the creation of a new marketing organization with ten customer segments, consideration of the aftermarket for growth potential, the development of new marketing concepts, and the addition of new products. Haraldsson planned to retire in late 2004, leaving Alfa Laval on the hunt for a new leader.