Flowserve sheds legacy asbestos liabilities in $219M deal with Oaktree affiliate

[Asbestos pipe insulation above ceiling.]
James Ebanks/iStock via Getty Images

Flowserve (NYSE:FLS [https://seekingalpha.com/symbol/FLS]) said Tuesday it agreed to transfer all of its remaining asbestos-related liabilities and related insurance assets to an affiliate of Acorn Investment Partners, a portfolio company of Oaktree Capital Management, marking a significant step in simplifying its balance sheet and reducing future financial volatility.

Under the deal, Acorn will assume full responsibility for BW/IP – New Mexico Inc., the Flowserve (NYSE:FLS [https://seekingalpha.com/symbol/FLS]) subsidiary that holds the asbestos obligations. Acorn will also manage all current and future asbestos claims, fully indemnifying Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) against any future exposure.

At closing, BW/IP will be capitalized with related insurance assets and about $219 million in cash, $199 million from Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) and $20 million from Acorn. Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) said the move will permanently remove all asbestos liabilities, associated deferred tax assets and related insurance assets from its consolidated balance sheet.

The company expects to record a one-time loss of approximately $135 million in the fourth quarter of 2025, including transaction-related costs, though the charge will be excluded from adjusted earnings per share. Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) projected the divestiture will boost annual free cash flow by roughly $15 million to $20 million and enhance its flexibility to invest in strategic growth initiatives.

The transaction is expected to close before the end of 2025.

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