Ontario-Based Cat Dealer Toromont to Acquire Quebec’s Hewitt Equipment

In a major consolidation of Eastern Canada’s Caterpillar dealers, Toromont Industries, owner of Eastern Canada’s largest Cat dealer, has agreed to acquire the Hewitt Group of companies for close to C$1.02 billion. Hewitt Equipment Ltd. is the authorized Caterpillar dealer for the province of Quebec, Western Labrador and the Maritimes, as well as the Caterpillar lift truck dealer for most of Ontario.

Toromont will pay $917.7 million in cash plus the issuance of 2.25 million Toromont shares, estimated at about $100 million based on 10-day average share price at signing.

Hewitt is also the MaK dealer for Quebec, the Maritimes and the Eastern seaboard of the United States, from Maine to Virginia. MaK is a line of heavy fuel oil, marine diesel, gas and dual fuel engines, used in a wide variety of marine applications.

Upon close of the acquisition, Toromont’s Caterpillar dealership will operate 120 branches in Ontario, Quebec, Manitoba, New Brunswick, Nunavut, Nova Scotia, Prince Edward Island, and Newfoundland & Labrador, giving the company one of the largest sales territories in the Caterpillar dealer network

“The acquisition delivers a substantial growth opportunity, allowing us to expand into the significant Quebec, Western Labrador and Maritime markets, and strengthens our expertise in the mining, construction, power systems and forestry sectors,” said Scott Medhurst, Toromont president and CEO. “We are very proud to have the Hewitt Group join us and are privileged to be taking on the stewardship of this excellent business and building on the family legacy. We intend to add to its position of strength by investing in people, facilities, technology and rental fleets. Our position will allow us to better capitalize on organic growth opportunities given the recovery of the mining sector that we are currently experiencing and the promise of significant infrastructure investment.”

“For more than 65 years, the Hewitt Group has been at the center of the resource and construction industries in Quebec and the Maritimes, helping to get roads, dams and mines built and running,” added Jim Hewitt, chairman and CEO of Hewitt Equipment. “With the trend towards consolidation taking root in each of the sectors in which Hewitt operates, we are confident that our customers and employees will benefit from working within an even larger organization with access to even more resources and capital.”

Headquartered in Pointe-Claire, Quebec, a suburb of Montreal, Hewitt sells, rents and services the full line of Caterpillar and other products through six business entities: Hewitt Equipment, Atlantic Tractors, Location Hewitt/Hewitt Rentals, Hewitt Material Handling, Montreal Hydraulique and SITECH QM. Hewitt, founded in 1952, has 45 branches and employs more than 2,000 people. The company is privately held. In 2016, Hewitt generated revenues of more than $1 billion, operating profit of $66.4 million and net earnings of $46.6 million.

“The acquisition is the largest in our 56-year history and is only possible because of the strength of our balance sheet and proven track record as a disciplined operator focused on generating steady growth across each of our core markets,” said Medhurst.

The Quebec market is not new to Toromont, which also operates CIMCO, a refrigeration services division.

Toromont will fund the acquisition through current cash on hand, unsecured debt financing of up to $750 million and the issuance of 2.25 million Toromont shares. A syndicate of financial institutions has provided Toromont with committed bank financing of up to $750 million to fund the transaction and a revolving working capital facility of up to $500 million. Before closing, Toromont intends to launch a bond offering of up to $400 million. The acquisition is expected to close by mid-October 2017, subject to regulatory consents and customary closing conditions.

On a conference call, Medhurst explained some of the rationale for the acquisition from Toromont’s point of view. “Our customers are getting bigger and they’re working in multiple territories and jurisdictions,” he said. “They also want the benefit of consistent service and quality products from fewer and fewer suppliers.”

The acquisition comes at a time when Quebec’s economy is on the upswing. The province recently disclosed plans to spend $91 billion on infrastructure during the next 10 years. Of $9.6 billion in capital to be spent this year, about 22 percent is slated for road construction. Also the mining industry is rebounding in the province, which has large reserves of copper, zinc, nickel and iron ore.

Toromont also owns Battlefield Equipment Rentals, which operates the Cat Rental Store operations in Ontario, Manitoba, Newfoundland and Labrador. Battlefield is No. 18 on the RER 100, with $161 million in 2016 rental revenue. Hewitt also operates Hewitt Rents, No. 46 on the list.