Columbus McKinnon Buys Magnetek in Deal Worth $188.9m

Columbus McKinnon Corporation, a manufacturer of material handling products, and Magnetek Inc. have confirmed that they have entered into a definitive agreement for Columbus McKinnon to acquire all of the outstanding shares of Magnetek for $50 per share for a total value of $188.9 million. Magnetek designs and manufactures digital power and motion control solutions for material handling, elevators and mining applications.

The transaction combines complementary strengths to create more competitive and comprehensive material handling solutions for customers, a statement said. The agreement has been approved unanimously by the boards of directors of both companies and Magnetek’s board has unanimously recommended that its shareholders tender into the offer, which is anticipated to commence on or before August 5 2015, by a wholly-owned subsidiary of Columbus McKinnon.

All of the members of Magnetek’s board and executive officers, together with Fundamental Global Investors LLC, have entered into agreement to tender the shares beneficially owned by them into the offer.

Magnetek supplies digital drives, radio controls, software, and accessories for industrial cranes and hoists, and provides digital direct current (DC) motion control systems for elevators. Customers include most of the industrial crane and hoist companies in North America, including Columbus McKinnon, and the world’s leading elevator builders and mining equipment manufacturers.

“The accretive combination of Magnetek’s technology and ‘smart power’ with our broad line of lifting and positioning mechanical products creates a total solution for our customers,” said Timothy Tevens, president and CEO, Columbus McKinnon.

He added: “We believe Magnetek’s technology will enable the industrial world to continue to advance productivity and safety beyond what mechanical solutions alone can offer. Strategically, this acquisition provides an ideal adjacent capability for us to continue to supply our customers with best in class material handling solutions.

“We see many opportunities for revenue synergies by advancing Magnetek’s power control technology globally through our multiple sales channels and introducing it into key vertical markets. In addition, we can offer more complete material handling solutions to shared key vertical markets including automotive, heavy OEM, mining, as well as energy.”

Headquartered in Menomonee Falls, Wis., Magnetek has approximately 340 employees. Trailing 12 month sales as of the end of its first quarter of fiscal 2015 were $112.2 million, of which approximately 10% was international. Nearly 75% of revenue was related to material handling. Sales were up 10% in Magnetek’s first quarter of 2015, while income from continuing operations increased 74% compared with the prior-year period. Operating margin for the period was 9.4% of sales.

Peter McCormick, Magnetek president and CEO, said: “Our technology and products are a perfect complement for Columbus McKinnon’s products and this compelling combination provides a platform to accelerate growth for both Magnetek and Columbus McKinnon. Our companies have a strong commitment to quality and service and have excellent reputations in the markets we serve with very similar corporate cultures. Importantly, our strong and dedicated team will contribute to what I believe is a formula for success.”

McCormick will remain with the company following the acquisition and continue to lead the Magnetek business and help integrate the two companies.

The all-cash transaction value of $188.9 million will be funded through a combination of cash on hand and debt.

Cost synergies are expected to be at least $5 million in the first full year after the acquisition. Excluding purchase accounting adjustments, the acquisition is expected to be approximately $0.40 per share accretive to earnings in the first full fiscal year of combined operations. Columbus McKinnon estimates its one-time costs related to the transaction to be between $7.5 million to $8.5 million.

Together, Columbus McKinnon and Magnetek generated total revenue of $690 million in the trailing 12 month period ended March 2015. The effective enterprise value multiple is approximately 8.9x of adjusted EBITDA for the first full fiscal year which includes $5 million in cost synergies and the present value of Magnetek net operating loss carry-forwards of approximately $17.5 million.