Dec 13 (Reuters) - U.S. private equity firm Lone Star will buy SPX Flow Inc (FLOW.N) in an all-cash deal valued at $3.8 billion, including the assumption of debt, the industrial pumps and valves maker said on Monday.

Lone Star offered $86.50 per share, representing about 1% premium to SPX's last close on Friday.

The offer price represents about 40% premium over SPX's closing stock price on July 16, the last trading day prior to a Wall Street Journal report on July 18 that Ingersoll Rand Inc (IR.N) had made a takeover bid for the company.

"This acquisition is consistent with Lone Star's strategy to invest in businesses with substantial runway for growth," said Donald Quintin, president of Lone Star Opportunity Funds.

SPX, which makes components for machinery used by industries such as food and beverages, will operate as a privately held company upon closing of the deal. It said that it has agreed to suspend payment of its quarterly dividend, effective immediately, as a condition of the deal.

"SPX has transformed its business and made important progress executing against our strategic plans, and we believe this transaction with Lone Star is an exciting culmination of those efforts for our shareholders," said Chief Executive Officer Marc Michael.

SPX had earlier this year rejected Ingersoll's proposal stating the offer undervalued the company. Later, SPX announced it would explore strategic alternatives, including a sale or merger of the company.

Morgan Stanley & Co. LLC served as the financial adviser to SPX Flow, while Winston & Strawn LLP was the legal adviser.

Citi, RBC Capital Markets, LLC, and BofA Securities acted as financial advisers to Lone Star and Gibson, Dunn & Crutcher LLP and Kirkland & Ellis LLP served as legal advisers.

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