Flowserve to Acquire MOGAS Industries, Accelerating 3D Growth Strategy

• Strategically expands severe service flow control offering in attractive mining, mineral extraction and process industries
• Highly complementary product and service offering with large installed base that meaningfully enhances Flowserve’s aftermarket opportunity
• Attractive upfront purchase multiple of approximately 7.5x MOGAS’ 2024E adjusted EBITDA which is expected to reduce further with synergy realization
• Transaction expected to be adjusted Earnings Per Share (EPS) accretive in the first full year following close

Flowserve Corporation (“Flowserve”) (NYSE: FLS), a leading provider of flow control products and services for the global infrastructure markets, announced today that it has signed a definitive agreement (the “Agreement”) to acquire MOGAS Industries (“MOGAS”), a privately held, Houston-based provider of mission-critical severe service valves and associated aftermarket services for $290 million with a potential $15 million earnout (the “Transaction”). The Transaction is expected to close in the fourth quarter of 2024.

Founded in 1973, MOGAS was established by V. Louis Mogas with the purchase of a small machine shop. Today, MOGAS is a leading manufacturer of severe service isolation valves for a variety of end-markets, including mining, power and process industries through its state-of-the-art manufacturing facility in Houston. MOGAS has established sales and service offices in Australia, China, Europe, Canada, South America, the Middle East and India, countries which are highly complementary to Flowserve’s served geographies.

MOGAS' differentiated valve products are expected to enhance Flowserve's installed base, creating meaningful aftermarket opportunities. Upon completion of the Transaction, MOGAS will be integrated into Flowserve’s Flow Control Division (FCD) segment, building upon Flowserve’s comprehensive valve and automation portfolio with the addition of MOGAS’ strong brand, heritage, and technical expertise in diverse and attractive end markets. Flowserve anticipates customers of both companies will significantly benefit from the newly combined product portfolios in the growing mining industry.

“MOGAS is highly complementary to Flowserve’s current valve portfolio and further advances our 3D growth strategy by roughly doubling our direct mining and mineral extraction exposure and driving further diversification. The combination creates technically differentiated scale in severe service flow control with significant aftermarket contribution,” said Scott Rowe, Flowserve’s President and Chief Executive Officer. “This acquisition meets our disciplined financial criteria and positions us to enhance value for all our shareholders, customers and associates. We are excited to welcome the MOGAS team to Flowserve.”

Matt Mogas, President and Chief Executive Officer of MOGAS, commented, “There is no better cultural and strategic fit for our family’s 50-year-old business than joining with Flowserve, a company that shares our unwavering commitment to customers, people, and products. Our employees, who are at the heart of our success, will benefit from the alignment of values and opportunities for growth within a larger organization.”

Transaction Details and Approvals

The Transaction includes an upfront purchase price of $290 million of cash consideration with an additional earnout of up to $15 million tied to the achievement of certain minimum levels of adjusted EBITDA of the MOGAS business for the calendar year ended December 31, 2024. When adjusted for approximately $15 million of expected tax benefits, the upfront purchase price represents a purchase multiple of approximately 7.5x MOGAS’ 2024E adjusted EBITDA.

The Transaction is expected to be accretive to Flowserve’s adjusted EPS in the first full year following closing. MOGAS expects to contribute revenues of approximately $200 million with adjusted EBITDA margins in the high teens.

The additional scale, footprint consolidation and procurement opportunities provided by the combination provide clear visibility to at least $15 million of run-rate cost synergies within two years after closing of the Transaction. Further, the Transaction is expected to increase Flowserve’s aftermarket potential and provide the opportunity for revenue growth synergies as well.

Flowserve expects to fund the upfront cash consideration through a combination of cash and available debt financing. The Transaction is subject to the satisfaction of customary closing conditions and regulatory approvals.

Advisors

Jefferies is serving as financial advisor and Baker McKenzie is serving as legal advisor to Flowserve. Baird is serving as financial advisor and Foley & Lardner is serving as legal advisor to MOGAS.

About Flowserve

Flowserve Corp. is one of the world’s leading providers of fluid motion and control products and services. Operating in more than 50 countries, Flowserve produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. More information about Flowserve can be obtained by visiting Flowserve’s Web site at www.flowserve.com.

Safe Harbor Statement: This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, statements with respect to the rationale of Flowserve or MOGAS for entering into the Agreement, the expected benefit of the Transaction, the timing of the various steps to be completed in connection with the Transaction and other statements that are not material facts.

The forward-looking statements included in this news release are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the following: (a) the possibility that the Transaction will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, court and regulatory approvals and other conditions of closing necessary to complete the Transaction or for other reasons; (b) the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the Transaction; (c) risks relating to MOGAS’ ability to retain and attract key personnel during the interim period; (d) the possibility of litigation relating to the Transaction; (e) credit, market, currency, operational, liquidity and funding risks generally and relating specifically to the Transaction, including changes in economic conditions, interest rates or tax rates; and (f) other risks inherent to Flowserve or MOGAS’ respective businesses and/or factors beyond their control which could have a material adverse effect on either of the parties or their ability to complete the Transaction.

All forward-looking statements included in this news release are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.

Non-GAAP Financial Information: Some of the financial information and data contained in this press release, such as adjusted EBITDA margins, have not been prepared in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"). Flowserve’s management believes that the presentation of these non-GAAP financial measures provides investors with a greater transparency comparison of operating results across a broad spectrum of companies, which provides a more complete understanding of Flowserve’s financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted EBITDA margins, to assess operating performance and that such measures may highlight trends in Flowserve’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.

While Flowserve believes these non-GAAP measures are useful in evaluating Flowserve’s performance, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.

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