Milwaukee-based Douglas Dynamics Inc. has agreed to acquire Kings Park, New York-based Dejana Truck and Utility Equipment for $206 million.
Douglas manufactures vehicle attachments and equipment at three U.S. facilities for global distribution. It has had a relationship with Dejana for more than 25 years. Douglas will fund the acquisition with cash, asset based lending revolver draw and an expansion of its existing term loan by $130 million. The deal, expected to close in the third quarter, includes a $26 million performance earn out.
Dejana up fits Class 4-6 trucks and commercial work vehicles, and also manufactures van and truck storage solutions and cable pulling equipment for trucks. A family-owned company founded in 1957, it had grown to $145 million in revenue over the trailing 12 months ending March 31. It has seven manufacturing and up fit facilities and employs about 500 people in five states.
Douglas has about has 1,100 full-time employees across North America, about 300 of whom are in Milwaukee. The company said the acquisition is advantageous because it diversifies the company’s offerings and reduces its weather-driven risk exposure. It is expected to be accretive to earnings in 2017.
“The addition of such a high quality company as Dejana will significantly strengthen our position as a premier manufacturer and up fitter of vehicle attachments and equipment. The deal provides a new complementary portfolio of services and products to drive deeper customer relationships, and expands our geographic footprint in the eastern U.S.,” said James Janik, chairman, president and chief executive officer of Douglas Dynamics.
The deal will not change Douglas Dynamics’ capital allocation strategy, with priority placed on maintaining and growing its dividend; paying down debt; and pursuing strategic acquisitions at disciplined valuations, said Bob McCormick, executive vice president and chief financial officer at Douglas, in a call with analysts this morning.
“We do not anticipate making facility or workforce adjustments, and are excited to add the 500-strong Dejana workforce to our team,” McCormick said. “This is a well-run business today and we don’t intend to fix what isn’t broken, but improvements can always be made.”
Douglas plans to continue to expand Dejana, while implementing its management system and driving cost savings. Andrew Dejana, president of Dejana, will continue to lead the subsidiary.
“On behalf of my father, Pete Dejana, who founded our company in 1957, and the rest of the Dejana family, we are pleased to be joining such a great organization as Douglas Dynamics,” Andrew Dejana said. “We are very proud of the legacy we have built and are happy that the Dejana name will continue to provide innovative, best in class, cost effective solutions for many years to come. We look forward to working with the Douglas team to build upon the successful partnership we have developed over the past 25 years.”
