Toro will purchase The Charles Machine Works, parent company of Ditch Witch, for $700 million in cash. The acquisition is pending regulatory approvals, Toro said in announcing the definitive agreement.
Both companies field a lineup of underground equipment, including horizontal directional drills. The Charles Machine Works lineup includes walk and ride-on trenchers, utility loaders, vacuum excavators, asset locators, pipe rehabilitation solutions and after-market tools. The move creates several product redundancies, not only in HDD but also in mini skid steers.
“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 CEO, in a press release. “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.”
Rick Johnson, Charles Machine Works CEO, said in the announcement:
“Our success is the result of years of hard work and an unwavering commitment to developing innovative solutions for customers. 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.”
Closing is expected before the end of Toro’s third quarter, in July 2019. Toro said it plans to use cash on hand and debt to finance the acquisition, and said the purchase price represents about eight times Charles Machine Works’ calendar year 2018 EBITDA. It cited a current year sales estimate of $725 million.