Alfa Laval's Proposed Acquisition Adds Capital Deployment To The List Of Investor Worries

On the whole, I've liked Alfa Laval (OTCPK:ALFVY) more than the Street, and that has worked out okay, with the stock more or less performing in line with the S&P and beating its industrial peer group. Now, though, the company has made a controversial decision to pay a high premium to buy its way into the valve market - a decision that, in the short term at least, will only magnify concerns about the company's exposure to weak end-markets like oil/gas and petrochemicals.

I can understand the long-term argument for acquiring Neles, and I'm certainly not going to ignore the idea that the premium multiple Alfa is offering is inflated by weak current conditions. Moreover, if investors are constantly advised to try to buy into weakness, doesn't the same apply to companies? All of that said, I think there were better options for Alfa, and I think this is a deal that could weigh on sentiment until management can show real deliverables on the deal.

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Alfa Laval's Proposed Acquisition Adds Capital Deployment To The List Of Investor Worries