In a significant development in the financial landscape, Terex Corporation has announced plans to acquire the environmental solutions division of Dover Corporation, which includes essential waste and recycling equipment. The transaction is valued at $2 billion and will be conducted entirely in cash, highlighting Terex's commitment to strategic growth in the sector. When adjusted for the present value of anticipated tax benefits, the effective purchase price stands at approximately $1.73 billion.
This assessment translates to a valuation multiple of roughly 8.4-times the expected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the year 2024, as per Terex’s disclosures. The company anticipates realizing around $25 million in combined cost and revenue synergies by the year 2026, illustrating a clear path towards enhancing operational efficiency. The market response to the announcement has been robust, with shares of Terex experiencing a remarkable 9.7% increase during afternoon trading sessions. Simon Meester, Chief Executive of Terex, expressed his enthusiasm regarding the acquisition.
He stated, "This acquisition represents an incredibly exciting milestone in our multi-year transformation. It aligns seamlessly with our overarching goal of solidifying our portfolio while effectively leveraging our operational system to drive sustainable, accelerated long-term growth." In contrast, Dover Corporation announced that its environmental solutions group (ESG) generated an impressive revenue of approximately $750 million last fiscal year.
The product offerings within this division include refuse collection vehicles, compactors, balers, and a suite of aftermarket equipment complemented by digital solutions. Following the news, however, shares of Dover witnessed a decline of 1.7% in the market. Richard Tobin, Dover's Chief Executive Officer, reflected on the deep-rooted connection of ESG within the Dover family over the decades.
He noted, "ESG has been a vital component of Dover, creating substantial value for our shareholders throughout this period." The integration of ESG is poised to significantly broaden Terex's addressable market in North America while incorporating a financially accretive and non-cyclical business within their portfolio.
Historical data indicate that the business has sustained a long-term organic revenue compound annual growth rate (CAGR) surpassing 7% over the last 10 years. This growth is fuelled by Terex's reputation as a manufacturer of material handling equipment and aerial work platforms. The effects of this acquisition are expected to be substantial, with ESG's EBITDA margin, including anticipated synergies, projected to enhance Terex's EBITDA by an estimated $1 billion on a pro forma basis.
This strategic move is anticipated to contribute a double-digit percentage increase to adjusted earnings per share (EPS) in the fiscal year 2025. Looking ahead, Terex is scheduled to unveil its financial results for the second quarter of the 2024 fiscal year on July 31. The company has outlined that the transaction is expected to finalize in the latter half of 2024, contingent upon regulatory approval processes.
In line with their financing strategy, Terex has secured debt financing in order to facilitate the purchase alongside available cash resources. As of the latest market data, Terex shares were priced at $61.59, representing a change of +5.13, signifying a percentage increase of +9.09..