09.09.2008

Manitou Buys Gehl

Manitou has signed a definitive agreement to acquire US based telehandler and skid steer manufacturer Gehl.

Manitou is already Gehl’s largest single shareholder following the formation of a partnership between the two companies in North America. Manitou is paying $30 a share for the business, valuing Gehl at $450 million.

The transaction will be effected through a tender offer for all outstanding shares of Gehl by a Manitou subsidiary, Tenedor Corp followed by a second step, cash out merger.

The offer is a 120 percent premium over the company’s closing price on Friday of $13.66, Gehl said it is expected that the current management team will be retained.

Chief executive William Gehl said: “We are pleased to announce the next step in the evolution of Gehl Co. toward becoming a more significant player in the global compact equipment marketplace. The combination of Gehl and Manitou offers a substantial value to our shareholders today while affording our dealers and employees with future opportunities for continued success.”

The tender offer opened yesterday and will remain open until 17:00 Eastern time on October 20th, unless extended. If the tender offer is successfully completed, shares not tendered will be cashed out in a second step merger at the same $30 per share.

Gehl has the right to terminate the agreement to accept a superior offer, subject to the payment of a termination fee of $14 million. Manitou already owns around 14.4 percent of Gehl’s equity and Manitou chief executive Marcel-Claude Braud is already a Gehl director.

The addition of Gehl will add skid steer loaders to the Manitou product line, and give it a market share in North America of somewhere in the region of 15 percent.

It will also boost revenues at the French company to around $2.3 to $2.5 billion.

Vertikal Comment

Manitou has long looked at ways to increase its market share in North America, and its co-operation with Gehl has helped that a little, however the market is currently in the doldrums, thanks to a sharp fall in residential and some commercial construction. It would therefore seem strange to increase ones exposure to the market at this time.

Buying in at the bottom of the market is of course a very solid policy, whether we are there now is something that no one knows, but regardless of where we are Manitou has paid a top of the market price. Gehl’s share price only reached or exceeded $30 for a few months in the summer of 2006, since then it has been in steady decline to under $12.

The net tangible asset value of the company is just $249 million while the $30 offer values the company at around $400 million. Naturally most investors look like accepting the offer, some are even selling now at $29, possibly just in case the deal falls through?

It is all very well though talking about the price, a hostile take over is simply not Manitou’s style and it would have been keen to maintain the management team and its goodwill in order to build on what it has bought.

Manitou will have looked at what it can do and will have considered that as a closely held company it can perhaps afford to be more aggressive in the North American telehandler market against JLG, CAT and Terex in order to grab a larger share for the combined product line.

It also acquires a number of new products including skid steer loaders, and mini excavators, and will be looking to boost Gehl revenues quickly by selling these other products through its dealer network, possibly branded as Manitou?

Manitou has a long history of taking the long view, it will be interesting to watch the development of this move in the years ahead.