Company: Pentair, Ltd.
Year Founded: 1966
Headquarters: Golden Valley
Annual Revenue: $8 billion (2013 projected)
Ticker: PNR (NYSE)
What It Does: Flow control (valves, pumps) and filtration products for industrial and residential applications.
“The deal,” as it has been referred to both inside and outside Pentair offices, was one of those quantum-leap moments that confirms a company’s presence on the international stage. And in the case of what eventually became a merger of Pentair and a division of Swiss-based giant Tyco International, there is no question that the driving force behind the deal was Randall Hogan, now in his 12th year as Pentair’s CEO.
Hogan’s merger completed the decade-long transformation of Pentair that began when he became the Golden Valley–based company’s CEO in 2001.
While Pentair had prospered well enough as a holding company with interests in such sectors as paper products and power tools, Hogan persuaded the Pentair board that there were 4 billion emerging middle-class consumers on the planet outside the United States who would be making American-style demands for clean water consumption. What he was prepared to do as CEO was reorient the company internationally.
Hogan understood not only the systems and manufacturing involved in water filtration and related products, but also global demographics. His engineering education, followed by a career path that included stops at United Technologies, Pratt & Whitney, General Electric, and McKinsey & Company, primed him to lead Pentair’s electrical enclosures operations beginning in 1998. He helped inspire a heightened interest in accelerating worldwide demands for clean water. Focusing on the water market, he argued, would “allow us to control our destiny.”
Hogan’s first task as CEO was selling off the power tool business to Black & Decker for $800 million. Next, he bought WICOR, the water products division of Wisconsin Energy, for $850 million. Combined with Pentair’s existing water filtration business, the new entity became a $2 billion operation, with a new and focused direction for Hogan and Pentair to pursue more growth and transform Pentair from a holding company to an operating one.
The move toward Tyco, a company that had been hobbled by the malfeasance of now-convicted former CEO Dennis Kozlowski, meant being ready to exploit a ripe opportunity. The ability to act fast was another tenet Hogan had preached within Pentair. He wanted the company’s ship fully turned and operations streamlined for easy integration when the logical match came along, which it did with Tyco.
Tyco’s board had decided to split the company into three separate entities. Hogan’s move was to capture their flow control operations and create a global enterprise—the largest of its kind—that he and his Pentair team would run. Tyco wasn’t prepared to relinquish majority ownership, but it did agree to Hogan’s proposal that Pentair manage the merged entity, despite owning only 49 percent of the new company.
Throughout the negotiations, Hogan’s focus was “remarkably intense,” says Pentair Senior Vice President for Human Resources Fred Koury, who has been with the company throughout Hogan’s tenure as CEO. “The genius of the Tyco deal, in my opinion, was his ability to create an opportunity by convincing them of the value of our business model, and that a merger with us would give them something they hadn’t been able to establish.”
The deal with Tyco was announced in March 2012 and closed in September, with a price tag in the range of $4.9 billion to $5.3 billion, including debt. The new firm, Pentair, Ltd., is projecting revenues in the $8 billion range for this first year, with more than 60 percent of that money coming from international operations.
Devices and systems for liquid energy industries and water-dependent interests in the United States alone are significant. (A 2002 Congressional Budget Office report projected annual infrastructure investment in drinking water at $11.6 billion to $20.1 billion through 2019, with another $13 billion to $20.9 billion in wastewater systems.) But Hogan speaks most enthusiastically about emerging economies—China, India, Brazil, and the rest of Latin America—in terms of where Pentair’s destiny lies. And Hogan will continue to lead the company toward its next destination.