Alamo group acquires Gradall

February 06, 2006

Gradall, a product brand and company that has been an industrial mainstay in New Philadelphia, Ohio for over 50 years, has been sold to the Alamo Group Inc. The sale was announced at a recent employee meeting at the plant and in news announcements distributed by Gradall, Alamo Group and JLG Industries Inc., which had owned Gradall since 1999.

Alamo Group is a leader in the design, manufacture, distribution and service of equipment for right-of-way maintenance and agriculture. Products include tractor and truck mounted mowing and other vegetation maintenance equipment, street sweepers, agricultural implements, front-end loaders, backhoes and related aftermarket parts and service.

Founded in 1969, Alamo Group already has over 1,860 employees and 14 plants in North America and Europe. Corporate offices of Alamo Group Inc. are located in Seguin, Texas, and the headquarters of the company's European operations are located in Salford Priors, England.

Alamo becomes the ninth owner of Gradall excavators—generally recognized as the world's first hydraulic excavator and now the only excavator manufactured entirely in the U.S. Distinguished by its telescoping, tilting boom, Gradall excavators are considered premium products known worldwide for their versatile abilities to handle mass excavation, grading and sloping, demolition and waterway cleanup. Gradall virtually dominates the market for highway-speed wheeled excavators but models also are available with crawler and on/off highway wheeled undercarriages.

Beyond the construction equipment industry and government applications, Gradall produces models especially for mining, metal mill maintenance, railway construction and components for the firefighting industry.

"This is an exciting development for Alamo and one that will be synergistic to our business," said Ron Robinson, Alamo Group's president and CEO. Robinson attended the announcement meeting with employees held on a loading dock at the plant.

"Over half of Gradall's sales are to governmental buyers and related contractors for grading and maintenance along right-of-ways, which makes it an ideal fit with our Industrial Division. This division sells a variety of products including mowing equipment, street sweepers, road patchers, snow removal and other equipment for maintenance along roads and right-of-ways.

"With Alamo and Gradall together, we feel we can expand our market coverage and mutually enhance our sales potential, making this an excellent opportunity for the Alamo Group. Like many of our products, the Gradall excavator, with its telescoping boom arm arrangement is a high-quality product that serves a unique niche in the market."

Purchase price was $39.4 million, subject to adjustments, according to terms of the Asset Purchase Agreement, and is expected to be accretive to Alamo's earnings in 2006. The purchase is being funded by Alamo's expanded line of credit.

The sale includes the 430,000-sq-ft manufacturing facility in New Philadelphia and all related equipment, machinery, tooling and intellectual property.

In addition to the purchase agreement, Alamo and JLG have executed a supply agreement covering components for JLG's telescoping material handler product lines that currently are being manufactured at the New Philadelphia facility.

Gradall's excavator and related equipment services revenues were approximately $75.6 million at the end of JLG's fiscal year on July 31, 2005.

As part of the Alamo Group, the New Philadelphia facility will continue its Gradall excavator manufacturing operations as well as, at least on a temporary basis, manufacture certain components for other JLG products that currently are being produced in the plant. A majority of the Gradall workforce—numbering around 400—will be retained.

?Management of the Gradall operation will be assumed by veteran Gradall professionals who are already on site. "We are pleased to announce that Michael Haberman will be president of Gradall," said Robinson. "Mike has been with Gradall for over 18 years and most recently served as JLG's vice president of excavator products." Haberman and his family reside in New Philadelphia.

"I am very excited about the future of Gradall with the Alamo Group," said Haberman. "This transaction represents excellent news for the employees of Gradall and for the economy of Tuscarawas County and beyond. Gradall has been an important corporate citizen in this community for over 55 years, including our use of dozens of local businesses, and it's great that the positive Gradall impact will continue and grow even stronger again."

A JLG Industries news release noted that divesting of the Gradall excavator product line "is consistent with our strategy of focusing our efforts on our core access business and the proceeds from the sale will be used to continue implementing our growth strategy."

“The Gradall excavator is a well known and highly respected niche product line, but it is not a core business for JLG," said Bill Lasky, JLG's chairman of the board, president, and chief executive officer. "With this ownership change, the New Philadelphia excavator team will find more opportunities to flourish and grow with a more closely aligned family of products."

JLG's core business involves aerial work platforms and telehandlers. In 1982, the Gradall Co. acquired the load line of material handlers that were re-branded with the Gradall name. They were produced at the New Philadelphia plant until the late 1990s, when production was moved to Orrville and then to a JLG plant in McConnellsburg, Pa. Telehandler product development, however, continued to be based at the New Philadelphia plant.

As part of the acquisition, Alamo announced that it has entered into an amended and restated revolving credit agreement between the company and its lenders, Bank of America, N.A., JP Morgan Chase Bank and Guaranty Bank to expand the facility from $70 million to $125 million. The company has the ability to request an increase in commitments by $25 million. In addition, the asset coverage ratio was reduced and interest margins were lowered. The final maturity remains the same at August 25, 2009.