Terex Corp. has acquired Environmental Solutions Group from Dover Corp., making the Norwalk, Conn.-based manufacturer a major player in the waste management industry. Terex anticipates that ESG will drive increased revenue growth, free cash flow, EBITDA margin, and earnings per share accretion. The transaction is expected to be double-digit percentage adjusted EPS accretive in 2025, with meaningful growth thereafter. The all-cash transaction is for $2.0 billion, or $1.725 billion when adjusted for the present value of expected tax benefits of approximately $275 million.
The acquisition represents approximately 8.4x 2024E EBITDA, including expected run-rate synergies. With ESG, Terex will now derive 67 percent of its total revenue from North America, an increase from 61 percent based on trailing 12 months results ended Q2 2024.
ESG has demonstrated a track record of consistent, resilient growth, delivering more than 7 percent long-term organic revenue compound annual growth rate over the past 10 years. ESG holds the No. 1 position in North America in refuse collection vehicles, waste compaction equipment, and associated parts and digital solutions. ESG's product brands include Heil, Marathon, Curotto-Can, Bayne Thinline, and Parts Central as well as digital solutions offerings 3rd Eye and Soft-Pak. ESG's turnkey products and services across equipment, digital, and aftermarket offerings are complementary to Terex's businesses, and will allow Terex to expand its customer base, providing customers with a broader suite of environmental equipment solutions, and realizing economies of scale.
"We're delighted to welcome ESG into the Terex family of businesses,” said Simon Meester, Terex president and CEO. “ESG is a non-cyclical, financially accretive, market-leading business that will complement and strengthen Terex's portfolio with synergies in the fast-growing waste and recycling end market. ESG is led by a world-class management team and has a strong track record of operational excellence. We look forward to working with ESG to drive long-term, sustainable value for all our stakeholders."
ESG president to continue
Meester added that Patrick Carroll, president of Environmental Solutions Group for the past 14 years, will continue in that role. Carroll has extensive experience leading manufacturing businesses including serving as president of Terex Utilities from 2001 through 2005.
Julie Beck, Terex senior vice president and chief financial officer, said: "This acquisition significantly strengthens Terex's portfolio and creates a path for accelerated, sustainable growth. ESG has demonstrated a sustained track record of resilient, high-single digit organic growth through the cycle. Its EBITDA margin including run rate synergies is expected to add 140 basis points of margin accretion. ESG's efficient operating model with low net working capital will drive a meaningful improvement in free cash flow accretion. And finally, Terex expects approximately $25 million of identified synergies to be achieved by the end of 2026."
"At ESG, our vision has always been to improve the lives of our team members, our customers, and our communities,” said Carroll. “We are looking forward to becoming part of Terex, because we see it as a great cultural fit with opportunities to expand our positive impact. We are looking forward to greater scale and access to new markets."
UBS Investment Bank served as exclusive financial advisor and Fried Frank and Pryor Cashman served as legal advisors to Terex.
