Terex Corporation has agreed to acquire Environmental Solutions Group (ESG) from Dover Corporation, in a $2 billion 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 designs and manufactures refuse collection vehicles, waste compaction equipment, and associated parts and digital solutions.
ESG is comprised of several brands – Heil, Marathon, Curotto-Can, Bayne Thinline, 3rd Eye, and Soft-Pak. ESG's array of products and services across equipment, digital, and aftermarket offerings complement Terex and will allow the company to expand its customer base.
The transaction is anticipated to close in the second half of 2024, subject to the receipt of required regulatory approvals and customary closing conditions.
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 a new environmental solutions segment that includes ESG as well as Terex's existing utilities business. The segment combines Terex's 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.
