Terex Corporation (TEX) a global manufacturer of materials processing machinery, announced that it has signed an agreement to acquire Environmental Solutions Group (ESG) from Dover Corporation (DOV) in a $2 billion all-cash transaction. The deal is expected to close in the second half of 2024, subject to regulatory approvals.
The acquisition, adjusted for the present value of expected tax benefits of approximately $275 million, values ESG at $1.725 billion, representing about 8.4 times the estimated 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA), including expected synergies.
ESG, renowned for its position in the North American market for its refuse collection vehicles and waste compaction equipment, includes brands like Heil, Marathon, Curotto-Can, and Bayne Thinline, alongside digital solutions offerings 3rd Eye and Soft-Pak. The deal increases Terex’s exposure to the North American market, enhancing its global market potential to $40 billion.
The acquisition is expected to significantly expand Terex’s portfolio and presence in the waste and recycling industry, enhancing Terex’s customer base and environmental equipment solutions. The acquisition is financially favourable, with ESG’s EBITDA margin expected to contribute an additional 130 basis points to Terex. Terex estimates about $25 million in synergies by the end of 2026, deriving mainly from procurement efficiencies and commercial initiatives.
Following the acquisition, Terex will establish a new Environmental Solutions segment that incorporates ESG and Terex’s existing Utilities business, expected to generate combined pro forma last twelve months (LTM) revenues of $1.4 billion as of March 31, 2024.
Terex has secured debt financing from UBS Investment Bank, combining cash on hand and debt financing for the transaction. With this acquisition, Terex expects to improve its financial profile, forecasting revenue growth, enhanced EBITDA margins, and a net leverage ratio below 2.0x by the end of 2025, with expectations to reduce it below 2.0x by the end of 2025, aided by improved cash flows.
Simon Meester, President and CEO of Terex, expressed enthusiasm about the acquisition, stating, “This milestone is pivotal in our transformation journey, aligning perfectly with our strategic goals of portfolio enhancement and leveraging our operational capabilities for sustainable growth. ESG’s inclusion will not only diversify our revenue streams but also solidify our market leadership in the waste and recycling sectors.”
