The Toro Company on Friday acquired The Charles Machine Works Inc., an underground construction equipment manufacturer, in a $700 million cash deal. The deal adds a handful of new brands to Toro’s portfolio, including Charles Machine Works’ line of Ditch Witch drills and vacuum excavators.
Bloomington-based Toro, primarily known for making lawnmowers and turf maintenance machinery, expects that the deal will close in its third fiscal quarter this year.
Based in Perry, Oklahoma, Charles Machine Works primarily operates within the underground construction market. The company generated $725 million in 2018 selling products such as horizontal directional drills, walk and ride trenchers, utility loaders, vacuum excavators, and asset locators. These tools are largely used to treat underground pipe and cables.
Toro CEO Richard M. Olson said that the deal will help them dig further into the construction market.
“[Charles Machine Works] 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,” he said.
Toro plans to finance the deal with a combination of cash on hand and debt, which includes a financing arrangements and borrowings under its existing facility. The purchase is approximately eight times Charles Machine Works’ 2018 EBITA, or earnings before interest, tax, depreciation and amortization.
“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,” Olson added. “We share similar people values, performance expectations, business models focused on innovation, brand and channel, and strong community ties.”
Charles Machine Works CEO Rick Johnson agreed with Olson, saying the merger would help expand its reach in the underground construction market.
“From developing the world’s first service line trencher… to today’s robust Ditch Witch dealer network, our family of companies is well-positioned to join The Toro Company’s family of brands,” said Johnson.
The acquisition also aligns with Toro’s recent acquisition history, which has pushed for new market expansion. Less than a year ago, The Toro Company purchased L.T. Rich Products,a maker of stand-on equipment often used by landscape contractors. Roughly a month before that acquisition, Toro also made an investment in a Boston-based startup that uses drones to help golf courses improve their turf and water management.