Parent Company of a Strong Portfolio of
Underground Construction Brands Including Market-Leading Ditch
Witch
The Toro Company (NYSE: TTC) today announced that it has entered
into a definitive agreement to acquire privately-held The Charles
Machine Works, Inc., an Oklahoma corporation and the parent company
of Ditch Witch and several other leading brands in the underground
construction market, for $700 million in cash subject to certain
adjustments set forth in the definitive agreement. The transaction
is subject to regulatory approvals and other customary closing
conditions and is currently anticipated to close before the end of
Toro’s fiscal 2019 third quarter. More detailed information
regarding the transaction is included in an investor presentation
available at www.thetorocompany.com.
Headquartered in Perry, Oklahoma, Charles Machine Works designs,
manufactures and sells a range of products to cover the full
life-cycle of underground pipe and cable, including horizontal
directional drills, walk and ride trenchers, utility loaders,
vacuum excavators, asset locators, pipe rehabilitation solutions
and after-market tools. The company, known as “The Underground
Authority” for their deep understanding of the structures and
systems in those markets, and the most important needs of
underground construction professionals, generated calendar year
2018 revenues of approximately $725 million.
“The addition of Charles Machine Works will further strengthen
our portfolio of market-leading brands supported by talented
employees, a commitment to innovation, a best-in-class dealer
network and long-standing customer relationships,” said Richard M.
Olson, Toro’s chairman and chief executive officer. “As an
organization, Charles Machine Works aligns well with and will
contribute to our own strategic priorities of profitable growth,
operational excellence and empowering people. The company expands
our business in a meaningful way in an adjacent category we know
well through our own specialty construction business and in a
market that is attractive given the potential for growth in
addressing both aging infrastructure that is currently in place and
new infrastructure that will be needed to support next generation
technologies like 5G.”
“Culturally, our two organizations are very well aligned and, in
our past experience, that has been essential to the success of a
business combination like this. We share similar people values,
performance expectations, business models focused on innovation,
brand and channel, and strong community ties. With its rich
multigenerational family legacy, commitment to its employees and
market leadership position, we have respected and admired Charles
Machine Works for a long time. We were excited when joining forces
became a possibility, and we know that both companies will be
stronger together.”
“Our success is the result of years of hard work and an
unwavering commitment to developing innovative solutions for
customers,” said Rick Johnson, Charles Machine Works chief
executive officer. “From developing the world’s first service line
trencher in Perry, Oklahoma, to today’s robust Ditch Witch dealer
network, our family of companies is well-positioned to join The
Toro Company’s family of brands. We look forward to building upon
our founder’s legacy of best-in-class offerings in the expanding
underground construction market.”
Toro expects to finance the transaction with a combination of
cash on hand and debt, including from additional financing
arrangements and borrowings under its existing credit facility. The
all-cash purchase price of $700 million represents a multiple of
approximately eight times Charles Machine Works’ calendar year 2018
EBITDA, including $30 million of anticipated annual run-rate cost
synergies phased in over three years, that Toro intends to achieve
through opportunities in purchasing, manufacturing best practices
and administrative efficiencies. Toro expects the transaction to be
immediately accretive to EPS excluding purchase accounting
adjustments and transaction related expenses.
J.P. Morgan Securities LLC acted as financial advisor to Toro
and Fox Rothschild LLP and Latham & Watkins, LLP acted as
Toro’s legal counsel. Bank of America Merrill Lynch and J.P. Morgan
Chase Bank, N.A. have provided committed debt financing to Toro for
the transaction. McAfee & Taft A Professional Corporation,
acted as Charles Machine Works’ legal counsel.
About The Toro CompanyThe Toro Company (NYSE: TTC) is a
leading worldwide provider of innovative solutions for the outdoor
environment including turf maintenance, snow and ice management,
landscape, rental and specialty construction equipment, and
irrigation and outdoor lighting solutions. With sales of $2.6
billion in fiscal 2018, Toro’s global presence extends to more than
125 countries. Through constant innovation and caring relationships
built on trust and integrity, Toro and its family of brands have
built a legacy of excellence by helping customers care for golf
courses, sports fields, public green spaces, commercial and
residential properties and agricultural operations. For more
information, visit www.thetorocompany.com.
About Charles Machine WorksCharles Machine Works is The
Underground Authority—a family of companies delivering the most
advanced equipment and solutions for underground construction and
service in the world today. Its family includes Ditch Witch®,
Subsite® Electronics, DW/TXS®, HammerHead®, Radius® HDD, American
Augers®, Trencor® and MTI® Equipment. Together, the Charles Machine
Works family of companies offers the most complete line of
solutions for the full life-cycle of underground pipe and cable.
For more information, visit https://charlesmachine.works/.
LIVE CONFERENCE CALLFebruary 15, 2019 at 10:00 a.m.
CSTwww.thetorocompany.com/invest
The Toro Company will conduct a conference call and webcast for
investors regarding the transaction beginning at 10:00 a.m. CST on
February 15, 2019. The webcast will be available at
www.streetevents.com or at www.thetorocompany.com/invest. Webcast
participants will need to complete a brief registration form and
should allocate extra time before the webcast begins to register
and, if necessary, download and install audio software.
Forward-Looking StatementsThis news release contains not
only historical information, but also forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, and that are
subject to the safe harbor created by those sections. Statements
that are not historical are forward-looking and reflect
expectations and assumptions. Forward-looking statements are based
on Toro’s current expectations of future events, and often can be
identified in this release and elsewhere by using words such as
"expect," "strive," "looking ahead," "outlook," "guidance,"
"forecast," "goal," "optimistic," "anticipate," "continue," "plan,"
"estimate," "project," "believe," "should," "could," "will,"
"would," "possible," "may," "likely," "intend," "can," "seek,"
"potential," "pro forma," or the negative thereof and similar
expressions or future dates. Some of the forward-looking statements
in this release about Toro’s acquisition of Charles Machine Works
include Toro’s anticipated timing for the closing of the
acquisition, potential for growth of the underground construction
market, plans for funding the acquisition consideration, expected
earnings contribution from the acquisition and expected value to be
achieved through synergies. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those projected or implied. The following are some
of the factors known to Toro that could cause Toro’s actual results
to differ materially from what Toro has anticipated in its
forward-looking statements: delays in completing the acquisition
and the risk that the acquisition may not be completed at all; the
failure by Toro to achieve the net sales, earnings and any cost or
revenue synergies expected from the acquisition or delays in the
realization thereof; delays and challenges in integrating the
businesses after the acquisition is completed; business disruption
during the pendency of and following the acquisition; loss of key
personnel; unanticipated liabilities or exposures for which Toro
has not been indemnified or may not recover; infringement of
intellectual property rights of others associated with the rights
acquired in the acquisition; and general adverse business, economic
or competitive conditions. For more information regarding these and
other uncertainties and factors that could cause Toro’s actual
results to differ materially from what it has anticipated in its
forward-looking statements or otherwise could materially adversely
affect its business, financial condition or operating results, see
Toro’s most recently filed Annual Report on Form 10-K, Part I, Item
1A, “Risk Factors.” All forward-looking statements included in this
release are expressly qualified in their entirety by the foregoing
cautionary statements. Toro cautions readers not to place undue
reliance on any forward-looking statement which speaks only as of
the date made and to recognize that forward-looking statements are
predictions of future results, which may not occur as anticipated.
Actual results could differ materially from those anticipated in
the forward-looking statements and from historical results, due to
the risks and uncertainties described above, the risks described in
Toro’s most recent Annual Report on Form 10-K, Part I, Item 1A,
“Risk Factors,” as well as others that Toro may consider immaterial
or does not anticipate at this time. The foregoing risks and
uncertainties are not exclusive and further information concerning
Toro and its businesses, including factors that potentially could
materially affect Toro’s financial results or condition, may emerge
from time to time. Toro undertakes no obligation to update
forward-looking statements to reflect actual results or changes in
factors or assumptions affecting such forward-looking statements.
Toro advises you, however, to consult any further disclosures it
makes on related subjects in its future Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form
8-K that Toro may file with or furnish to the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190215005069/en/
Investor RelationsHeather HilleDirector, Investor
Relations(952) 887-8923, heather.hille@toro.com
Media RelationsBranden HappelSenior Manager, Public
Relations(952) 887-8930, branden.happel@toro.com
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