ESAB (NYSE:ESAB) executives outlined plans to acquire Eddyfi Technologies in a deal they said will expand the company beyond fabrication into inspection and monitoring, creating what management described as an end-to-end workflow solution spanning fabrication, inspection, and lifecycle monitoring.
Strategic rationale: extending ESAB’s workflow
Chief Executive Officer Shyam Kambeyanda said ESAB has spent roughly the last two and a half years studying the inspection and monitoring space through its internal “EBX” process, mapping customers’ end-to-end workflows to identify where value is created and where returns on capital appear structurally more attractive. He said the work highlighted inspection and monitoring as a “compelling extension” of ESAB’s current workflow, citing technology-led demand, mission-critical applications, secular tailwinds, attractive margins, and lower cyclicality.
Eddyfi profile and end markets
Management characterized Eddyfi as a market leader in electromagnetic testing, ultrasonic testing, and automated inspection. Kambeyanda said the company serves mission-critical end markets including aerospace, defense, nuclear, and energy infrastructure, and that its offerings are supported by trends such as aging infrastructure, rising inspection requirements, increasing power generation demand, and skilled labor shortages driving automation.
During Q&A, management provided a breakdown of Eddyfi’s end-market mix as presented on the company’s slides:
- Nuclear: 30%
- Civil infrastructure (bridges, roads, dams): 24%
- Energy infrastructure (including oil and gas and liquefied natural gas): 12%
- Aerospace and defense: 12% (described as the fastest-growing part of the business)
- Remainder across other industrial categories
Management also highlighted Eddyfi’s geographic positioning, noting its largest exposure is to North America, with additional exposure in Europe and smaller exposure to regions where ESAB has established positions, including South America, the Middle East, and India. Kambeyanda also cited Eddyfi strength in Japan and Korea that ESAB expects to leverage.
Financial characteristics, recurring revenue, and synergy targets
Kambeyanda said Eddyfi delivers high single-digit growth, gross margins of about 65%, and EBITDA margins of approximately 30%. He also said the acquisition would accelerate ESAB’s shift toward equipment, expand margins, and reduce cyclicality.
In response to questions about demand drivers and recurring revenue, Kambeyanda said Eddyfi’s growth includes roughly 200 basis points from pricing, 200 to 300 basis points from underlying market growth, with the balance attributed to share gains from technology leadership. He also said Eddyfi has a service component and generates recurring revenue from probes and sensors used in inspection and monitoring, noting that many probes and sensors are single-use in certain applications. Management said this results in roughly 55% recurring revenue.
ESAB said it identified $20 million in run-rate synergies through its diligence process, with opportunities cited across sourcing, shared services, digital workflow integration, geographic expansion, and operational efficiencies. Management said synergies would build over time.
Transaction terms and financing
Chief Financial Officer Kevin (as introduced on the call) said the acquisition price is $1.45 billion on a cash-free, debt-free basis. Eddyfi is projected to generate about $270 million in 2026 revenue with an EBITDA margin over 30%.
Management said the deal values Eddyfi at 14.5x 2026 earnings after factoring in the $20 million of annual run-rate savings. Financing is expected to come from cash on hand, debt, and $318 million in privately placed securities, including $175 million of a mandatory convertible preferred and $143 million of common equity.
On the mandatory convertible, management said it carries a 6.5% dividend with a 15% premium, with a maximum of about 1.45 million shares and about 1.26 million shares on conversion in three years. On the common equity portion, management indicated roughly 1.25 million shares.
At closing, net leverage is expected to be in the low 3x range, with management expecting leverage to drop below 3x by year-end and remain within its targeted 2x–3x range.
Outlook, margin targets, and EPS timing
Management said the Eddyfi acquisition moves ESAB toward its previously stated goal of a 60/40 ratio of consumables to equipment. On a pro forma basis, ESAB said it expects 2025 revenue of approximately $3 billion, with EBITDA margins around 21%, about 100 basis points below its 2028 target of 22%. Kambeyanda added that ESAB now expects to reach approximately 22% EBITDA margins by 2027.
ESAB also provided preliminary results for the fourth quarter of 2025, citing total core growth of approximately 8.5% and organic growth down 1.8%, which management attributed to a softer December due to unexpected weakness in Europe and South America as customers stopped operations earlier than anticipated for the holidays. Management said high-growth markets, including the Middle East and India, remained strong. The company also said EWM integration is progressing well.
For 2026, ESAB guided to organic growth of 2% to 4%, excluding the impact of the Eddyfi acquisition, which management expects to close around midyear. The company also expects about a four-point benefit from M&A and a 0% to 1% foreign exchange tailwind. Adjusted EBITDA is projected at $575 million to $595 million, with about 40 basis points of margin expansion at the midpoint (excluding EWM). Management also outlined expectations for $25 million of savings offset by $15 million of growth investments, interest expense of $80 million to $85 million, an adjusted tax rate of 20% to 21%, and cash flow conversion of approximately 90%.
On earnings, Kambeyanda said the acquisition is expected to be EPS accretive in 2027. In response to an analyst question, management said it expects some EPS dilution in 2026 if the deal closes midyear, while noting the transaction would be margin accretive at the gross margin and EBITDA margin levels.
About ESAB (NYSE:ESAB)
ESAB Corporation is a global leader in welding, cutting and gas control technologies, offering a comprehensive portfolio of equipment, consumables and automation solutions. The company’s products include welding power sources, cutting machines, torches, electrodes, filler metals and gas regulating equipment designed to meet the needs of diverse industries. ESAB serves sectors such as construction, shipbuilding, automotive, energy, infrastructure and manufacturing, providing both standard and customized solutions to enhance productivity and quality in metal fabrication and processing.
Founded in 1904 by Swedish inventor Oscar Kjellberg, ESAB pioneered the development of coated welding electrodes, laying the groundwork for modern welding practices.
