December 17, 2018

The age-old company Crane Co., famous for building everything from car parts to ATMs, is pursuing its growth and has entered a new development phase, with the acquisition of Crane Currency. This new investment will allow Crane Co to complete the integration of its production network as well as an attack base for new markets.

Both companies, Crane Co. and Crane currency, rank among the oldest businesses on the highly-fluid US market. Crane Co., founded in the mid-19th century, built its growth on the basis of ever expanding from its current markets, into the adjacent ones, and constantly seeking potential applications for its existing products. Hence, the fiberglass panels which were initially designed for the aeronautics market found its place into the RV market as exterior housing. Sensing and control equipment can also be distributed into various markets, and the presence of Crane Co. on the automatic vending machine segment made for a logical cause to acquire Crane Currency, which produces the money used mostly in those machines. Overall, Crane Co. is an all-American and highly flexible conglomerate, as explained by Mark Hahn (managing director and founder of Graphic Arts Advisors, an American boutique strategic financial advisory and consulting firm): “Crane Co. morphed into a high-tech engineered products company, it manufactured products used in aviation, fluid systems, process controls and space exploration (Crane Co. valves are on the moon). In 1990, as the company began to strategically focus on highly-engineered products, the bathroom fixtures division was sold off to American Standard.”

Crane Co. acquired Crane Currency for 800 million dollars recently, in a strategic choice to complete its network chain within the financial instrument market. Already a major player on the ATM market, Crane Co. will now be drawing profits from both the automatic teller machines in the US, and from the currency which they channel. Crane currency, which is even older than its now-parent company Crane Co., started printing bills in 1801, within the nascent United States, and was the first to develop the method of embedding silk within the cotton paper, a counterfeiting-deterring method still used today. The purchase of Crane Currency by Crane Co. had been in the air for some time. According to currency-specialized website Coinweek, “Mitchell says that the acquisition fits in with his company’s strategic plan for growth in the field of payment technologies. Crane Co. is a manufacturer of currency validating devices used in vending machines and other sorts of automated apparatus that handle physical money and has collaborated with Crane Currency in the past.”

Faithful to its expansion strategy, Crane Co. inked the deal in the beginning of 2018. The new strategic turn will benefit both mother and daughter companies, through increased market presence for Crane Co. and through renewed financial streamlining for Crane currency. As the cornerstone of the new strategic impulse, the closing down of the Swedish paper mill, and the simultaneous creation of a new one in Malta, will allow for better outputs and profit. Through the 100-million-dollar investment, Crane Co. now has a production unit which will enable profitable layoffs and reduction of costly staff. The offshoring will also enable the mother company to lighten its fiscal load, with Malta being a place of choice for tax avoidance and optimization. Finally, laws in Malta are notoriously lax, giving Crane Co. a perfect launching platform to start tackling the market. The strategy was saluted as likely to generate additional profits by rating agencies, such as Zacks: “In the past three months, Crane’s shares have outperformed the industry. The company’s emerging track record and cash generation indicate a bright future for the company. Going forward, the company expects to gain from solid organic growth potential, tax cuts and its repositioning initiatives. The Crane Currency buyout will strengthen the company’s foothold in the currency and payments market and will be accretive to earnings this year itself ” says Gemma Cottrell.

Naturally, the new strategy disrupts the market, and has already met some resistance and created frictions, however small. Sweden, which is losing its printing facility in the shift, is opposed to the transfer – despite its labour laws being in large part responsible for the loss. Crane Co. will, however, be keeping a close eye on the situation, to address the risk of other countries joining Sweden. Scandinavian countries are known to be the most defensive of their labour laws, but Central Banks all over the world often develop hostility towards banknote manufacturers which indulge profit-driven relocations and social dumping. Finally, the policy of centralizing production in a country like Malta may raise trust issues: Sveriges Riksbank broke its contract with Crane since the production was no longer taking place in Northern Europe. The security and quality of the new factory are still to be confirmed, lacking for example the European Central Bank certification. BBC reporter Christopher Giles says: “Theoretically, a country could be undermined by outsourcing production if the manufacturer printed more than was asked for, without the permission of a central bank, oversupplying an economy with cash. That could have an undesired effect on the economy, such as inflation. There’s also the risk that a foreign power printing money would have the knowledge of the security features of a particular banknote, making it possible to produce fraudulent notes.”

Despite the rise of alternative payment solutions since the beginning of the 21st century, cash is nowhere near disappearing and remains king. With the new Maltese production unit Crane Currency is all set to tackle the immense market of banknote production, therefore matching Crane Co. strategy. This, providing the production and supply chain receive Central Banks “Seal of Approval”. If not, the 800 million dollars acquisition would be at risk!

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Brian Kohler