Terex to acquire Environmental Solutions Group in $2B transaction

Materials processing machinery company Terex Corp. has signed a definitive agreement to acquire Environmental Solutions Group (ESG) from Illinois-based Dover Corp. in a $2 billion all-cash transaction.

Terex, based in Norwalk, Connecticut, says that, when adjusted for the present value of expected tax benefits of approximately $275 million, the purchase price is $1.725 billion. The transaction is expected to close in the second half of this year, subject to the receipt of required regulatory approvals and customary closing conditions.

Based in Chattanooga, Tennessee, ESG is a provider of refuse collection vehicles, compactors and balers from brands such as Heil, Marathon, Curotto-Can and Bayne Thinline, as well as related aftermarket equipment and digital offerings such as 3rd Eye and Soft-Pak that enable onboard vehicle safety systems, route management, predictive maintenance and customer relationship software. ESG says it generated approximately $750 million in revenue in 2023.

"ESG has been a part of the Dover family for decades and has created significant value for Dover shareholders over this time period," Dover President and CEO Richard J. Tobin says. "I would like to recognize and thank ESG President Pat Carroll and his management team for the transformational change in the business over the last decade."

Terex says ESG’s broad array of turnkey products and services across equipment, digital and aftermarket offerings are complementary to Terex’s businesses and will allow it to expand its customer base, provide customers with a broader suite of environmental equipment solutions and realize economies of scale.

In a news release announcing the transaction, Terex says ESG has demonstrated a track record of consistent, resilient growth, delivering a more than 7 percent long-term organic revenue compound annual growth rate (CAGR) over the last 10 years.

“This acquisition announcement of ESG marks an incredibly exciting milestone in our multiyear transformation and aligns with our goal of strengthening our portfolio and leveraging our operating system to drive sustainable, accelerated long-term growth,” Terex President and CEO Simon Meester says. “ESG will add a non-cyclical, financially accretive and market-leading business to Terex’s portfolio with tangible synergies in the fast-growing waste and recycling end market. In addition, ESG is led by a world-class management team and has a strong track record of operational excellence.

"We look forward to welcoming the ESG team to Terex and driving long-term, sustainable value for all our stakeholders.”

Terex plans to create a new Environmental Solutions segment that includes ESG as well as Terex’s existing utilities business. The segment combines Terex’s market position in utility equipment with ESG’s portfolio of 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, Terex says the new segment would have generated pro forma LTM revenues of $1.4 billion.

According to Terex, additional highlights of the transaction include:

• Adds meaningful scale and significantly reduces cyclicality: ESG has demonstrated a sustained track record of resilient, high-single digit organic growth through the cycle.
• Financially accretive: ESG’s earnings before interest, taxes, depreciation and amortization (EBITDA) margin including run rate synergies is expected to add 130 basis points of margin accretion. Terex will have approximately $1 billion in pro forma EBITDA.
• Tangible cost and revenue synergies: Terex expects around $25 million of identified synergies to be achieved by the end of 2026, largely driven by procurement, supply chain efficiencies and commercial initiatives.
• Market leader in waste and recycling: Terex says ESG holds the No. 1 position in refuse collection vehicles and waste compaction equipment in North America, enabling Terex to create three market-leading business segments and to serve as a leader in the fast-growing waste and recycling end market.
• Adds addressable market in North America: Terex says its North American exposure will increase to 65 percent, expanding its global market opportunity to $40 billion.
• Reduces capital intensity: Terex says ESG’s operating model with low net working capital will drive a meaningful improvement in free cash flow accretion.

Terex says the deal enhances its financial profile, delivering revenue growth, free cash flow, EBITDA margin and EPS accretion. The company expects the transaction to be double-digit percentage adjusted EPS accretive in 2025, with meaningful growth anticipated thereafter, and has obtained fully committed debt financing from UBS Investment Bank. Terex says it expects to fund the transaction with a combination of cash on hand and debt financing.

UBS is serving as Terex' exclusive financial advisor in this transaction, and Fried Frank and Pryor Cashman are serving as its legal advisors. Centerview Partners acted as Dover's financial advisor, while Skadden, Arps, Slate, Meagher & Flom LLP has served as its legal counsel.