Recently Terex (NYSE: TEX) changed its earnings date (from Feb. 19 to Feb. 26), which has created ample speculation about possible M&A. Baird analyst Mig Dobre is asking today if Astec Industries (NASDAQ: ASTE) could be the target.

The analyst thinks such a deal might make sense. He notes the two are direct competitors in the crushing and screening business - Materials Processing segment for TEX, Aggregate and Mining Group for ASTE. Terex has long viewed the segment as a stable, attractive piece of their portfolio, according to Dobre. By acquiring ASTE, Terex would add fixed crushing/screening/conveying capabilities to TEX mobile product; wood chippers, concrete pavers, mobile crushing and screening should have overlap/synergies.

ASTE would add its North America market share-leading asphalt plants as well as mobile pavers broadening TEX's Materials Processing portfolio. Dobre highlights that ASTE’s core business is driven by less-cyclical highway funding, with downturns typically resulting in 8-10% revenue declines which could be a cyclical dampener to TEX’s overall portfolio. In addition, ASTE could give TEX room to potentially altogether divest Crane down the line, with the proceeds used to reduce the leverage resulted from the acquisition.

The economics of a deal also makes sense, Dobre said. If TEX paid a 27% premium ASTE's current price and finance the transaction with debt, TEX’s net-debt-to-combined-LTM EBITDA would be ~3.7x pre-synergies. "Synergies and (maybe?) monetization of the Crane business could push leverage quite a bit lower; ASTE also has several smaller non-core product lines which could be divested (mostly in Energy Group)," he adds.

In addition to the changed earnings date, the analyst highlighted several other interesting set of circumstance that could suggest something is afoot:

• Mr. Ben Brock resigned on January 22 (LINK); Mr. Brock was CEO since 2014 and had a long legacy at ASTE (his father founded the company) with the COO stepping in as interim CEO.
• ASTE shareholders have been pushing for improved performance (cost, margin, cash generation) with an outside consultant hired last summer to help.
• Perhaps worth knowing, the activist investor on TEX’s board was an ASTE shareholder (sold position in 4Q18).
• Lastly, ASTE’s 4Q18 earnings release also appears to be later than normal (date yet to be announced).