After 117 years of being Oklahoma owned, the Perry-based Charles Machine Works, makers of Ditch Witch equipment has been sold in a $700 million deal to the Toro Company.
Toro is based in Bloomington, Minnesota and explained it is a cash deal for the Ditch Witch company that was founded in 1902. The deal is expected to close before the end of Toro’s fiscal 2019 third quarter.
Charles Machine Works, a firm specializing in the manufacture of equipment used in underground pipe and cable installation generated 2018 revenues of nearly $725 million. Ditch Witch is known as “The Underground Authority.” It has more than 1,600 employees in Perry and another 500 at other sites.
“The addition of Charles Machine Works will further strengthen our portfolio of market-leading brands supported by talented employees, a commitment to innovation, a best-in-class dealer network and long-standing customer relationships,” said Richard M. Olson, Toro’s chairman and chief executive officer. “As an organization, Charles Machine Works aligns well with and will contribute to our own strategic priorities of profitable growth, operational excellence and empowering people. The company 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.”
“Our success is the result of years of hard work and an unwavering commitment to developing innovative solutions for customers,” said Rick Johnson, Charles Machine Works chief executive officer. “From developing the world’s first service line trencher in Perry, Oklahoma, to today’s robust Ditch Witch dealer network, our family of companies is well-positioned to join The Toro Company’s family of brands. We look forward to building upon our founder’s legacy of best-in-class offerings in the expanding underground construction market.”
Toro expects to finance the transaction with a combination of cash on hand and debt, including from additional financing arrangements and borrowings under its existing credit facility.
The all-cash purchase price of $700 million represents a multiple of approximately eight times Charles Machine Works’ calendar year 2018 EBITDA, including $30 million of anticipated annual run-rate cost synergies phased in over three years, that Toro intends to achieve through opportunities in purchasing, manufacturing best practices and administrative efficiencies. Toro expects the transaction to be immediately accretive to EPS excluding purchase accounting adjustments and transaction related expenses.