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Toromont Industries Ltd. is set to acquire rival heavy equipment company Hewitt Equipment for a CAD 1.02 billion cash and stock deal. This acquisition is expected to strengthen Toromont’s position in the construction and heavy equipment industry, and will add approximately 45 branches and 2,000 employees to its locations in Quebec and in the Maritimes.
When the deal is complete, Toromont will have one of the biggest sales territories of all Caterpillar equipment dealers, bringing Toromont’s total number of Caterpillar dealerships to 120, located in Nunavut and Canada’s eastern provinces. The acquisition will also help Toromont to refine its focus on gold mining in Canada, and will allow it to benefit from a highly anticipated rebound in Canada’s metal mining industry. Hewitt has involvement with base metals operations in Labrador Trough, which is known to be rich in iron ore.
In a press release, Toromont CEO Scott Medhurst said, “Acquiring Hewitt marks a very important milestone for Toromont and is beneficial to our customers, employees and shareholders on many levels.” He added, “Our position will allow us to better capitalize on organic growth opportunities given the recovery of the mining sector that we are currently experiencing and the promise of significant infrastructure investment. We look forward to working with key members of Hewitt’s leadership team.”
By the end of December 2016, Hewitt had generated revenues of over CAD 1.0 billion, as well as an operating profit of CAD 66.4 million. The company’s net earnings totalled CAD 46.6 million. Though Toromont has advised that these figures do not indicate Hewitt’s future performance, they do show acquiring Hewitt may benefit its profit margins.
This move will consolidate Canada’s heavy equipment and machinery market, offering fierce competition to smaller players, especially those outside of Ontario. The acquisition is being paid for in CAD 917.7 million in cash, as well as CAD 2.25 million in Toromont’s shares. The deal is expected to close by mid-October of this year.
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