Target: Hewitt Equipment Limited
- Industry: Industrials – Capital Goods Dealers
- Acquirer: Toromont Industries Ltd. (TSX:TIH)
- Target: Hewitt Equipment Limited
- Size: $1 billion
- Consideration: 88.5% Cash, 11.5% Equity
- Source of Funds: Debt, Stock
- Sell Side Adviser: National Bank
- Buy Side Advisers: BMO Capital Markets, CIBC Capital Markets, TD Securities
- Legal Advisers: Davies Ward Phillips & Vineberg, Mccarthy Tetrault
- Expected Close: Q4 2017
On August 28th, 2017, Toromont Industries entered into a definitive agreement to acquire Hewitt Equipment for $1 billion.
The transaction includes $917.7 million in cash plus the issuance of 2.25 million Toromont shares, valued at a total of $119.41. Toromont will finance the cash portion of the deal using unsecured debt financing.
The deal values Hewitt Equipment at an implied Equity Value/Net Income of 21.9x.
Hewitt Equipment is the authorized Caterpillar dealer for the province of Québec, Western Labrador and the Maritimes, as well as the Caterpillar lift truck dealer for most of Ontario. Hewitt is also the MaK dealer for Québec, the Maritimes and the Eastern seaboard of the United States, from Maine to Virginia.
Toromont Industries is a diversified industrials company providing specialized capital equipment to customers across various sectors.
Through the deal, Toromont will acquire Hewitt’s 45 Caterpillar dealerships in Quebec, the Maritimes, Labrador West and Ontario, increasing the number of Toromont’s heavy equipment dealerships to 120 and adding 2,000 new employees.
Toromont Industries views the purchase as a way to take advantage of government infrastructure spending and a recovery of metal prices. “The timing, we think, is really exciting for what we see going on in the mining” and “We see some recovery in there as well, with the governmental focus on infrastructure in Central and Eastern Canada”, according to Toromont CEO Scott Medhurst. Toromont Industries will gain economies of scale from being a much larger Caterpillar dealer and may realize potential cost synergies as a result of this deal.
Note: Toromont was widely seen before to have a widely underleveraged balance sheet (very low debt relative to size and cash flow). As such, it has been well positioned for this acquisition for a while. The market reacted very positively to this transaction due to the synergies from consolidation for capital goods dealers in Canada. Finning International is the other major CAT dealer in Canada.
Target: Polaris Materials Corporation (TSX:PLS)
- Industry: Industrials/Materials – Construction
- Acquirer: Vulcan Materials Company
- Target: Polaris Materials Corporation
- Size: $248 million
- Consideration: 100% Cash
- Source of Funds: Undisclosed
- Sell Side Advisers: Canaccord Genuity
- Buy Side Adviser:
- Legal Advisers: Fasken Martineau DuMoulin LLP, Osler, Hoskin & Harcourt, Dorsey & Whitney LLP, Wachtell, Lipton, Rosen & Katz LLP, McInnes Cooper, Blake, Cassels & Graydon LLP
- Expected Close: Q4 2017
Vulcan Materials Company, an S&P 500 company based in Birmingham, Alabama, will purchase Polaris Materials Corporation for $248 million.
Vulcan has agreed to purchase all outstanding shares of Polaris at $2.79 per share at an implied EV/Revenue multiple of 4.1x. The cash purchase price also represents a 191% premium to the closing price of Polaris on August 25, 2017.
Vulcan is the United States’ largest producer of construction aggregates. The deal will allow the company to gain access to a processing plant and deep water port on Vancouver Island and associated long term reserves. The reserves include those situated in the San Francisco Bay Area and Long Beach, California.
This year, Vulcan has been active in the capital markets and previously announced a $900 million acquisition of Aggregates USA back in May.
To better understand our M&A write-ups, please refer to the following:
Mergers & Acquisitions
Cash or Stock Consideration for M&A
Accretion/Dilution Part I: EPS, Earnings Yield & All-Stock Transactions
Accretion/Dilution Part II: Math and Breakeven Premiums
Accretion/Dilution Part III: Using Debt for Acquisitions
Accretion/Dilution Part IV: Synergies & Sources of Funds
Write-ups provided by Troy and Tim.