Twin Disc to acquire Veth Propulsion

Twin Disc Inc. announced yesterday that it had entered into a definitive agreement to acquire Veth Propulsion Holding B.V. and its wholly-owned subsidiaries, for approximately $58.6 million.

The acquisition is expected to be completed in July and is subject to typical closing conditions.

For over 65 years, Veth Propulsion has provided the global marine industry with propulsion and power control products and associated services. Headquartered in Papendrecht, Netherlands, Veth is a manufacturer of azimuth rudder propellers, thrusters and generator sets, and supplies and repairs diesel engines. In December 2015, Veth Propulsion selected Twin Disc as its distributor for select Asian markets. This relationship expanded with a North American distribution partnership in 2016.

“As we celebrate our 100th anniversary, I am excited to announce the accretive acquisition of Veth Propulsion. Twin Disc has worked with Veth Propulsion for over two years and the companies share similar cultures based on providing customers with high-quality products and leading design, engineering, and manufacturing services,” John H. Batten, president and CEO of Racine, Wis.-based Twin Disc, said in a statement. “Veth Propulsion strategically expands our global market opportunity, increases our size, scale, and scope within the marine industry, and diversifies our end-market penetration. This is part of our continual strategy to diversify our geographies, markets, and products.”

Twin Disc said that the deal offers several benefits:

  • Broad and complementary product portfolio provides added value to new and existing customers.
  • Further globalizes Twin Disc’s engineering talent and creates opportunities for faster marine and propulsion product development, including hybrid technologies.
  • Reduces Twin Disc’s dependence on oil and gas, with new technology and sales outside of this market.
  • Creates significant synergy opportunities through increased global sales, service and after-sales support of up to $2 million in operating income on an annual basis by fiscal year 2021.
  • Produces compelling value creation opportunity, with strong earnings accretion and continued balance sheet flexibility.

“Veth Propulsion has extensive experience in engineering and product development that will enhance our current product portfolio,” continued Batten. “Innovations like Veth Propulsion’s industry-recognized hybrid drive and integrated L-drive will open new markets and opportunities for growth for Twin Disc.”

“The market for azimuth thruster systems is well established,” said Erik Veth, Veth’s general Manager.  “This partnership provides Veth Propulsion with the opportunity for increased growth with world-class service and support in a truly global market. The Veth Propulsion management team views Twin Disc as the perfect acquirer of Veth Propulsion, and we believe that Veth Propulsion’s growth and success will be enhanced under Twin Disc’s ownership.”

For calendar 2018, Veth Propulsion is expected to achieve sales of $60 million (€51 million). The acquisition is expected to be accretive to Twin Disc’s U.S. GAAP earnings by the second year of ownership, in fiscal year ended June 30, 2020.

As part of the acquisition, Twin Disc expects to close a new $50 million asset-based line of credit and $35 million term note.

Twin Disc designs, manufactures and sells marine and heavy-duty off-highway power transmission equipment.  Products offered include: marine transmissions, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and control systems.  The Company sells its products to customers primarily in the pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government and industrial markets.

Operating internationally, Veth Propulsion engineers and manufactures azimuth rudder propellers, thrusters and marine electronics, and is a supplier and servicer of diesel engines and generator sets.

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