28.06.2007

Tanfield takes Snorkel

Tanfield has reached an agreement to acquire Snorkel, the St Joseph, Missouri based manufacturer of self propelled boom and scissor lifts, in a deal worth around $125 million. Which will comprise $95 million in cash, the granting of 1,535,662 shares in Tanfield, worth a further $5 million and the assumption of around $25 million in debt.

The cost is roughly seven times trailing 12 months earnings before interest and tax. Tanfield expect the acquisition to boost its 2008 revenues to almost £250 million almost double what it expects to achieve in 2007.

The £115 million in funds raised by Tanfield will be sufficient to cover the purchase price plus pay for the freehold of two Snorkel plants and fund the move of SEV electric vehicles into the North American market.

The purchase will transform Tanfield’s market position placing it in a position within reach of Skyjack, currently fourth place in self propelled aerial lift sales.
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Frank Scarborough, Al Havlin and Darren Kell in a hudle at this years ARA show in Atlanta

Snorkel built over 3,000 lifts last year while UpRight has been expanding at a very rapid pace and must be well on target to build 4,000 to 5,000 units this year.

Darren Kell said:“This is a transformational acquisition for Tanfield, significantly strengthening our position as a leading global manufacturer of aerial work platforms and commercial electric vehicles.

This acquisition is an excellent strategic and cultural fit with our existing UpRight Powered Access division.

The addition of manufacturing capability in the USA and Australasia, plus established sales networks in these territories, will create a Powered Access division with comprehensive global coverage.

There is very little overlap between the UpRight and Snorkel product ranges; presenting significant cross-selling opportunities in UpRight’s core territories of Europe and the Middle East and Snorkel’s core markets of North America and the Asia-Pacific region.

This fundraising will also provide Tanfield with the resources to establish Smith Electric Vehicles in North America, with a view to recreating the first-to-market success already enjoyed by Smith Electric Vehicles in the UK and mainland Europe.”


Vertikal Comment

Snorkel has been subject to a large number of overtures in the past year or two, as some companies sought to gain its boom lift range and reputation, while others were probably more interested in taking the company, which has made substantial comeback in recent years, out of the market.

Clearly Darren Kell and his team have managed to put together the right package that finally persuaded Al Havlin and his co-investors to part with the business that has grown way beyond their wildest dreams.

They bought the virtually closed business from Omniquip with the idea of using up the remaining production parts inventory, selling off the finished goods in stock, taking a short term profit and moving on.

They did not bank on the reputation and the goodwill among Snorkel customers, which combined with the inspired hiring of some key managers and an improving market, soon lead to the creation of a highly profitable business.

The challenge now will be how to handle the two businesses. On the one side there is a strong argument to merge Snorkel and UpRight, creating a strong full line producer which will have a decent shot at becoming the fourth or even third largest self propelled lift producer.

While on the other side with two powerful brands there is a case to operate the two businesses semi-independently with Snorkel selling UpRight scissors as Snorkel and UpRight selling the Snorkel booms under its own label.

Allowing either brand to die would throw away a mass of very tangible goodwill. Creating an UpRight-Snorkel brand could screw them both up. The strategy will need some careful consideration.

We understand that Snorkel's chief executive Frank Scarbourough and his team are positive about the acquisiton and the potential that the combined business offers.

In the meantime you can be certain that there will be groans from boardrooms from Pennsylvania and Ontario to central France.