Columbus McKinnon (CMCO) to Acquire Magnetek (MAG) in $188.9M Deal

Columbus McKinnon (NASDAQ: CMCO) and Magnetek, Inc. (NASDAQ: MAG) announced 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. The agreement has been approved unanimously by the Boards of Directors of both companies and Magnetek's Board of Directors 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 of Directors 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 is North America's largest independent supplier of digital drives, radio controls, software, and accessories for industrial cranes and hoists, and also the largest independent supplier of 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," noted Timothy T. Tevens, President and CEO of Columbus McKinnon.

Mr. Tevens continued, "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 twelve 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 M. McCormick, Magnetek's President and Chief Executive Officer, 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."

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

Transaction Terms and Details

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

Revenue synergies and strategic benefits:

• Combines technology with mechanical lifting solutions addressing growing trend of productivity, safety and advanced diagnostics in global industrial operations
  • Enables remote control and management of hoists and cranes for greater safety when moving loads
• Complete solution addresses needs in all targeted key vertical markets
  • Heavy OEM, Automotive, Transportation, Mining and Oil & Gas
• Expand Magnetek sales beyond the U.S. through Columbus McKinnon's global market presence
• Combination supports the strategic direction of "smart hoist" technology underway at Columbus McKinnon and Magnetek

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 twelve 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.

Columbus McKinnon, through a wholly owned subsidiary, expects to commence a cash tender offer for all of the outstanding shares of Magnetek on, or prior to, August 5, 2015. The tender offer is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. The tender offer requires as a condition to consummation that least a majority of the outstanding shares of Magnetek's common stock be tendered. The transaction is expected to close within 90 days.

Moelis & Company LLC was the exclusive financial advisor, DLA Piper and Barclay Damon served as special outside counsel, and L.E.K. Consulting served as market research consultants, to Columbus McKinnon. Goldman, Sachs & Co. was the exclusive financial advisor, and Foley & Lardner LLP was the legal advisor to Magnetek.

Special Teleconference Call and Webcast

Columbus McKinnon will host a teleconference on July 27, 2015 at 9:00 a.m. ET during which Timothy T. Tevens, President and CEO, Gregory P. Rustowicz, Vice President – Finance and CFO, Peter M. McCormick, Magnetek President and CEO and Marty J. Schwenner, Magnetek Vice President and CFO, will review the details of the acquisition. A question-and-answer session will follow management's prepared remarks.

The teleconference call can be accessed by calling (201) 493-6780. The listen-only audio webcast can be monitored at www.cmworks.com/investors. An audio recording of the call will be available two hours after its completion through Monday, August 3, 2015 by dialing (858) 384-5517 and entering the passcode 13615947. Alternatively, an archived webcast of the call will be on Columbus McKinnon's website at www.cmworks.com/investors and Magnetek's website at investorinfo.magnetek.com. In addition, a transcript of the call will be posted to the website once available.

You May Also Be Interested In

• Midday movers: Goldman Sachs and Meta Platforms rise; Apple and Tesla fall
• Orgenesis (ORGS) Issues Year End Business Update
• Accenture Federal Services (ACN)to Acquire Cognosante