Eriks Profit May Increase 20% on Econosto Acquisition

Excerpt of Article from Bloomberg

June 12 (Bloomberg) — Eriks Group NV, the largest Dutch distributor of machinery-sealing rings, may boost 2008 earnings 20 percent as the acquisition of Royal Econosto NV lifts revenue from oil companies, its chief executive officer said.

“Expectations for the markets Econosto is in are high for the next five to ten years”, CEO Jan van der Zouw, 54, said in a telephone interview yesterday. “Demand for Eriks’s products is still at a high level.”

Van der Zouw agreed in April to buy Econosto, which makes valves and fittings for the oil and gas industry, for 133 million euros ($206 million), at a time when record oil prices prompt companies including Royal Dutch Shell Plc to increase spending on production. Acquiring Econostowill double Eriks’s revenue from the oil industry to 10 percent of total sales, Van der Zouw said.

Earnings before interest, taxes and amortization may rise 20 percent this year to 90 million euros, with Econosto accounting for about 15 million euros, the executive said. Rabo Securities analysts Frank Claassen and Philip Scholte predicted an 84 million-euro Ebita in a May 16 note to clients. Econosto will be consolidated as of June 1.

Eriks is “on course” to meet its annual target of boosting sales by 5 percent, excluding acquisitions, Van der Zouw said. Alkmaar, Netherlands-based Eriks is scheduled to release first- half earnings on Aug. 21.

Eriks rose 99 cents, or 2.2 percent, to 46 euros in Amsterdam trading. The stock has dropped 26 percent in the past 12 months, giving the company a market value of 487 million euros. Eriks has advanced about 70 percent since Van der Zouw became CEO in 2005.

Revenue Target

With the Econosto purchase, Van der Zouw already reached this year’s target of boosting revenue by as much as 15 percent through acquisitions. He plans to consolidate Econosto’s results as of June 1. Econosto had sales of 261 million euros last year.

While demand for oil and gas-related products is strong, business from pharmaceutical companies and makers of semiconductor equipment for Eriks’s sealing rings, hydraulic pumps and drive belts isn’t “flourishing”, he said.

Van der Zouw offered Econosto investors 8.21 euros for each of their shares, trumping an earlier 7.25 euro-bid from Dutch buyout firm Gilde Buy Out Partners BV and ending a three-month battle. As of June 10, Eriks held 99.1 percent of Econosto shares and said it plans to delist Econosto July 7.

Founded in 1892 as a maker of parts for steam engines, Cappelleaan den IJssel-based Econosto has offices in Saudi Arabia, Kazakhstan and Qatar. Econosto is Eriks’s second-biggest acquisition ever, after Van der Zouw bought U.K.’s Wyko Holdings Ltd. for 206 million euros in October 2006.

Atlas Advisors acted as exclusive financial advisor to Econostoin connection with this transaction.

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