Flowserve Completes Divestiture of BW/IP Subsidiary Holding Legacy Asbestos Liabilitie
Flowserve Corporation (NYSE: FLS), a global leader in flow control products and services serving infrastructure markets worldwide, announced the successful completion of its previously disclosed divestiture of BW/IP – New Mexico, Inc. (“BW/IP”). BW/IP, a wholly owned subsidiary of Flowserve, is the corporate entity through which the Company’s legacy asbestos liabilities and corresponding insurance assets have historically been managed. The subsidiary has now been transferred to an affiliate of Acorn Investment Partners (“Acorn”), a portfolio company of funds managed by Oaktree Capital Management L.P.
This strategic transaction represents a significant step in Flowserve’s ongoing efforts to simplify its balance sheet, reduce risk, and strengthen its long-term financial position. With the closing complete, Flowserve has formally exited its direct financial involvement with these legacy liabilities.
Structure of the Transaction
Under the terms of the agreement between Flowserve and Acorn, the Company contributed a combination of insurance assets and $199 million in cash to BW/IP. This contribution was designed to fully capitalize the subsidiary in alignment with the transaction structure and to ensure that BW/IP has the resources required to meet its ongoing obligations after the transfer.
Following this capitalization, all asbestos-related liabilities, associated insurance assets, and claims management responsibilities were transferred to Acorn. The full assumption of these obligations by Acorn includes complete administration and oversight of all present and future claims related to BW/IP. As part of the agreement, Flowserve is fully indemnified and no longer holds any financial exposure associated with the transferred liabilities.
This divestiture allows Flowserve to eliminate the ongoing uncertainty and potential volatility associated with legacy asbestos claims, which have historically impacted companies in heavy industrial and manufacturing sectors. With the liabilities now under the administration of a specialized firm, Flowserve can redirect greater focus toward operational growth, commercial strategy, and financial performance.
Financial Impact and Expected One-Time Loss
Flowserve expects to record a one-time loss of approximately $140 million in the fourth quarter of 2025 as a result of the transaction. This loss includes the cash contribution to BW/IP as well as certain transaction-related expenses. Importantly, the Company noted that the loss will be excluded from adjusted earnings per share (EPS), consistent with its reporting practices for material non-recurring items.
The Company emphasized that the long-term strategic benefits of the divestiture—including reduced risk exposure and elimination of claims-related uncertainty—significantly outweigh the near-term accounting impact. Flowserve believes the transaction places the Company on a stronger financial footing and better positions it to advance key initiatives within its core markets.
Rationale for Divesting Legacy Liabilities
Legacy asbestos liabilities have long been a challenge for industrial companies with historical manufacturing exposure. These liabilities tend to persist over extended periods, creating:
- Uncertainty in long-term financial forecasting
- Complex claims management and administrative burdens
- Potential volatility in earnings results
By transferring BW/IP and all associated obligations to Acorn, Flowserve has effectively removed a non-core, legacy financial risk from its balance sheet. The divestiture not only reduces operational complexity but also enables senior leadership to concentrate resources on growth-oriented priorities such as expanding aftermarket services, advancing flow control technologies, and executing its long-term business strategy.
Acorn, which specializes in managing long-term risk pools, is strategically positioned to administer the BW/IP portfolio. With comprehensive expertise in claim resolution, insurance asset deployment, and long-tail liability management, Acorn is expected to oversee the subsidiary with greater efficiency and dedicated focus.
Safe Harbor Statement on Forward-Looking Information
This news release contains forward-looking statements made in accordance with the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. These statements include the use of words such as “may,” “should,” “expects,” “could,” “intends,” “plans,” “anticipates,” “estimates,” “believes,” “forecasts,” “predicts,” or similar expressions intended to identify such forward-looking information. The statements encompass, but are not limited to, expectations regarding future earnings performance, business strategy, industry conditions, and operational or financial outcomes following the divestiture.
Forward-looking statements reflect the Company’s current assumptions, expectations, and projections; however, they are not guarantees of future performance. Actual results may differ materially from those anticipated due to a wide range of risks and uncertainties. These include, but are not limited to, the following factors:
Global and Operational Risks
- Disruptions in global supply chains and inflationary pressures that elevate manufacturing costs and affect the delivery of products to customers.
- Delays or cancellations in converting bookings into revenue at acceptable margins.
- Changes in global economic activity that may reduce customers’ capital investments.
Industry and Market Dynamics
- Heavy dependence on market conditions within the energy, chemical, power generation, and general industrial sectors.
- Volatile raw material prices affecting input costs and profitability.
- Exposure to geopolitical, economic, and regulatory risks across international markets including North Africa, Latin America, Asia, and the Middle East.
Business Execution and Strategic Risk
- Potential underperformance in achieving benefits from restructuring or strategic initiatives.
- Risks associated with acquisitions and integration of acquired companies.
- Possible impairment of goodwill or intangible assets in changing market conditions.
Compliance, Legal, and Financial Risks
- Exposure to tariffs, trade policy shifts, and restrictions such as export controls or economic sanctions.
- Litigation risks, including potential claims related to asbestos or other legacy matters.
- Fluctuations in foreign currency exchange rates, including hyperinflationary markets.
- Dependency on third-party suppliers for critical components and materials.
- Environmental compliance obligations and associated costs.
Organizational and Technological Risks
- Labor matters, workforce disruptions, or pension obligations.
- Cybersecurity threats that could compromise data integrity or operational systems.
- Limitations in internal controls that may affect financial reporting accuracy.
- Challenges in protecting intellectual property domestically and internationally.
Flowserve encourages investors to review risk factors described in the Company’s filings with the Securities and Exchange Commission for further context regarding uncertainties that could impact future performance.
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