Terex Corporation (NYSE: TEX) (the “Company”) today announced it has signed a definitive agreement to acquire Environmental Solutions Group (“ESG”) from Dover Corporation (NYSE: DOV), in a $2.0 billion all-cash transaction. When adjusted for the present value of expected tax benefits of approximately $275
million, the purchase price is $1.725 billion. This represents approximately 8.4x 2024E earnings before interest, taxes depreciation and amortization (EBITDA) including expected run-rate synergies. ESG is a leader in the design and manufacturing of refuse collection vehicles, waste compaction equipment, and
associated parts and digital solutions.
ESG is comprised of several industry-leading product brands — Heil, Marathon, Curotto-Can, and Bayne Thinline, as well as digital solutions offerings 3rd Eye and Soft-Pak — that are respected throughout the solid waste industry for their quality, durability, reliability, unmatched service, and leading customer
return on investment. ESG’s broad array of turnkey products and services across equipment, digital and aftermarket offerings are complementary to Terex’s businesses, and will allow Terex to expand its customer base, provide customers with a broader suite of environmental equipment solutions, and
realize economies of scale. ESG has demonstrated a track record of consistent, resilient growth, delivering a 7%+ long-term organic revenue CAGR over the last ten years.
“This acquisition announcement of ESG marks an incredibly exciting milestone in our multi-year transformation and aligns with our goal of strengthening our portfolio and leveraging our operating system to drive sustainable, accelerated long-term growth,” said Terex President and CEO, Simon Meester. “ESG will add a non-cyclical, financially accretive, and market-leading business to Terex’s portfolio with tangible synergies in the fast-growing waste and recycling end market. In addition, ESG is led by a world-class management team and has a strong track record of operational excellence. We look forward to welcoming the ESG team to Terex and driving long-term, sustainable value for all our stakeholders.”
Compelling Transaction Rationale:
This acquisition significantly strengthens Terex’s portfolio and creates a path for accelerated sustainable growth. Terex believes this transaction creates significant shareholder value:
Adds meaningful scale and significantly reduces cyclicality: ESG has demonstrated a sustained track record of resilient, high-single digit organic growth through the cycle.
Financially accretive: ESG’s EBITDA margin including run rate synergies is expected to add 130 basis points of margin accretion. Terex will have approximately $1 billion in pro forma EBITDA.
Tangible cost and revenue synergies: Terex expects ~$25 million of identified synergies to be achieved by the end of 2026, largely driven by procurement, supply chain efficiencies and commercial initiatives.
Market leader in waste and recycling: ESG holds the #1 position in refuse collection vehicles and waste compaction equipment in North America, enabling Terex to create three market-leading business segments and to serve as a leader in the fast-growing waste and recycling end-market.
Adds attractive addressable market in North America: Terex’s North American exposure will increase to 65%, expanding its global market opportunity to $40 billion.
Reduces capital intensity: ESG’s efficient operating model with low net working capital will drive a meaningful improvement in free cash flow accretion.
Transaction Details
The transaction is anticipated to close in the second half of 2024, subject to the receipt of required regulatory approvals and customary closing conditions.
The deal enhances Terex’s financial profile, delivering revenue growth, free cash flow, EBITDA margin and EPS accretion. The transaction is expected to be double-digit percentage adjusted EPS accretive in 2025, with meaningful growth anticipated thereafter.
Terex has obtained fully committed debt financing from UBS Investment Bank and expects to fund the transaction with a combination of cash on hand and debt financing. Terex expects a 2024 net leverage ratio of 2.2x, below its stated target of 2.5x through the cycle. The Company expects net leverage below 2.0x by the end of 2025 with consistent deleveraging thereafter from an enhanced free cash flow profile.
Terex will create the new Environmental Solutions segment that includes ESG as well as Terex’s existing Utilities business. The segment combines Terex’s leading market positions in utility equipment with ESG’s portfolio of industry-renowned product brands. The segment will service the thematic, growing waste, recycling and utility end markets that are expected to benefit from growth themes including electrification, circularity and energy transition. As of March 31, 2024, the new Environmental Solutions segment would have generated pro forma LTM revenues of $1.4 billion.
Advisors
UBS Investment Bank is serving as exclusive financial advisor and Fried Frank and Pryor Cashman are serving as legal advisors to Terex.
Conference Call Details
The Company has scheduled a conference call to discuss the transaction today, July 22, 2024 beginning at 8:30 a.m. ET. Simon A. Meester, President and CEO, and Julie Beck, Senior Vice President and Chief Financial Officer, will host the call. A simultaneous webcast of this call can be accessed at https://investors.terex.com. Participants are encouraged to access the call 15 minutes prior to the starting time. The call will also be archived in the Event Archive at https://investors.terex.com.
The Company also plans to host a conference call to discuss its second quarter 2024 financial results on July 31, 2024 at 8:30 a.m. ET. A simultaneous webcast of this call will be available at https://investors.terex.com.
About Terex
Terex is a global manufacturer of materials processing machinery and aerial work platforms. We design, build and support products used in maintenance, manufacturing, energy, recycling, minerals and materials management, and construction applications. Certain Terex products and solutions enable
customers to reduce their impact on the environment including electric and hybrid offerings that deliver quiet and emission-free performance, products that support renewable energy, and products that aid in the recovery of useful materials from various types of waste. Our products are manufactured in North America, Europe, Australia and Asia and sold worldwide. We engage with customers through all stages of the product life cycle, from initial specification to parts and service support. We report our business in the
following segments: (i) Materials Processing and (ii) Aerial Work Platforms.
About ESG:
Environmental Solutions Group (“ESG”) encompasses industry-leading brands, such as Heil, Marathon, 3rd Eye, Soft-Pak, Parts Central, Currotto-Can, and Bayne Thinline to create a premier, fully integrated equipment group serving the solid waste and recycling industry. Through extensive voice-of-customer
outreach, in-house engineering and manufacturing capabilities, a wide-reaching service network, and proven industry expertise, ESG is focused on solving customer problems through environmentally responsible products and providing world-class support. For more information about ESG, visit
doveresg.com, the ESG Facebook page or follow ESG on Twitter.
Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks, uncertainties and material factors. The forward-looking statements contained herein speak only as of the date of this press release. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this press release to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
