Spartan to Purchase Smeal

[trucknews]

CHARLOTTE, Mich., Dec. 13, 2016 /PRNewswire/ -- Spartan Motors, Inc. (NASDAQ: SPAR) ("Spartan" or the "Company"), a global leader in specialty chassis and vehicle design, manufacturing, and assembly, today announced its wholly-owned subsidiary, Spartan Motors USA, Inc., has entered into a definitive agreement to acquire Smeal Fire Apparatus Co. ("Smeal"), an industry-leading innovator and manufacturer of fire apparatus in North America, and its subsidiaries for $36.3 million, subject to certain net working capital adjustments, the Company's forgiveness of certain liabilities owed by Smeal to the Company, and a subsequent tax gross-up payment, which is expected to be more than offset by tax benefits accruing to the Company. The acquisition will enable Spartan Motors to strengthen its Emergency Response business, gain scale and geographic reach in the industry, and accelerate its Emergency Response business unit turnaround plan. The transaction is expected to close in January 2017, subject to customary closing conditions.

Smeal is expected to generate 2016 revenues of approximately $100 million, which includes approximately $30 million of Spartan chassis sold to Smeal.  The newly combined Spartan Emergency Response business unit will rank as one of the top-four North American fire apparatus manufacturers and will be well positioned, in an increasingly consolidating industry, to provide a robust and respected portfolio of leading products, services, and technologies. Today, Spartan's Emergency Response business unit engineers and builds fire truck cabs and chassis for many of the industry's leading original equipment manufacturers (OEMs), including Smeal, as well as designs and manufactures complete fire apparatus. The acquisition of Smeal is a logical next step in the longstanding relationship between the two companies, which spans more than 30 years.

"We look forward to adding Smeal's industry-leading product portfolio and manufacturing expertise to Spartan's, while expanding on a decades-long successful partnership," said Daryl Adams, President and Chief Executive Officer of Spartan Motors. "We expect the acquisition to be accretive to earnings in 2017 and bring significant scale to our Emergency Response vehicle portfolio, which will help accelerate the turnaround of the Spartan Emergency Response business unit. It also expands the geographic reach of our dealers, benefits all of our customers by expanding our product offerings, and brings an additional portfolio of leading technology and expertise to the market."

Adams continued, "We are pleased that Smeal chose Spartan Motors as their partner to carry on their brand's legacy, as we take our supplier relationship to the next level. Spartan Motors is prepared to lead the consolidation charge in the fire apparatus market as strategic opportunities present themselves, and this acquisition represents a deliberate and strategic decision to accelerate the turnaround of Spartan's Emergency Response business unit. Importantly, we also preserve a large, longstanding chassis customer relationship and protect the interests of their dealer channel, as we expand our dealer network across the U.S. and Canada and simultaneously accelerate our goal of becoming the leader in the fire apparatus market."

[TacSupport1]

Wow! I did not see this coming! Thanks for the info!

[chief60]

Interesting to see what they do with aerials. They have 3 lines now plus the snorkel units.

[KENTucky]

I like to think I have a good grasp on the industry...and this was a shocker.  If anything, it would have been thought to be the other way around.  In my opinion, there is now too much brand confusion.  We have Spartan Motors who owns Spartan ER and Smeal, who owns UST, LTC, and the marketing rights to Danko.  If fire apparatus history repeats itself, somebody has to go bye-bye. 

 

Kent Parrish

Louisville, KY

[alex3610]

Disclaimer:  I'm a sales rep for a Smeal dealer.  That being said, this is a very interesting deal indeed.  I only found out about this last night so there is much that is still unknown.  I think facility and infrastructure wise everything will stay.  The Spartan ER aerial plant which currently shares a parking lot with the LTC aerial plant will very quickly become one again.  

 

My assumption (I emphasize that this my assumption and nothing more) is that you will see the Spartan ER aerials go away eventually and be replaced with the Smeal aerials and LTC.  I don't think many people would argue that Smeal's strong suit is it's aerial line up.  About the same time Don Smeal began building modern steel aerials out of structural steel the only other people in the country to do so were the Grove Crane company.  Grove, who would become LTI, who would become LTC.  RK aerials currently a part of Rosenbauer was started by a former Smeal employee.  Prior to about 1993/1994 Smeal was supplying the bulk of the aerial ladders for Pierce.  It's no surprise how similar today's Pierce aerials are to Smeal.  LTI invented the ladder tower or truly climbable ladder with a platform.  Snorkel was one of the originators of an articulating platform.  Snorkel's Tele-Squrt has numerous copies out there now.  Ferrara aerials?  Built by Smeal.  The point is, you can trace a hell of a lot of the modern aerial DNA back to Smeal (and now Spartan) in one way or another.

 

When I look at the pumper line I start to wonder if both the Smeal brand as well as the Spartan ER brand will both continue as they do today.  Perhaps you end up with a hybrid taking the best aspects of both and then the marketing gurus figure out what to call it.  UST who by the way builds fantastic stainless steel bodies at very competitive prices doesn't have the brand recognition of the others, so maybe it simply becomes the "stainless plant" for the mothership.  Just a guess here.

 

The trend in the industry is definitely towards consolidation.  Look at what REV Group now owns.  E\-One and KME have an awful lot of overlap so you would think they would probably start to eliminate some things here and there.  Then again, these are the same guys that own 8 ambulance brands.  Several of which are built in the same building.  So it's really hard to say what will happen.

 

IDEX and Safe Fleet are bothing gobbling up brands of emergency vehicle component manufacturers.  It's an interesting time for sure.  I think we will see some more moves in the next year or two, although it's anybody's guess who.  I think a lot of this is a sign of the industry finally recovering from the Great Recession and everyone now feels like they are in a safe enough place to make their respective moves.

[nozzleman]

how will this work with pending orders?

[alex3610]

Pending orders will all be completed as ordered.

[KENTucky]

Alex, I think you are spot on.  Smeal has always been thought of as one of the little guys, but a lot of people don't realize how truly pioneering Smeal has been in modern aerials and how much of Pierce's success is due to Smeal...and the Snorkel.     

 

Kent Parrish

Louisville, KY

[TacSupport1]

Here's an updated article on the jobs and other items in the local Nebraska newspaper:

 

http://www.omaha.com/money/jobs-at-smeal...3ab11.html

[npfd801]

Interestingly, Spartan has lost money like mad on the emergency side of their business.  Then all of a sudden they have a $100 million line of credit and buy their biggest purchaser of chassis.  

 

My guess is once Smeal ran out of cash, Spartan had no choice but to buy them to keep selling a large enough quantity of chassis to be sustainable.  How Smeal got to where they are would be an interesting story to learn.

 

Supposedly the REV Group folks were first in line to buy, I'd go so far as to bet that Spartan had to outbid them to keep selling a lot of chassis.  The press release for the sale states that of Smeal's 2016 revenue of $100 million, $30 million of it was Spartan chassis.  That's probably in the range of 150 chassis alone.  Anyone think that Spartan is building any more than 250 chassis a year, 300 tops for emergency service use?

 

I'll be curious to see if Spartan somehow starts to turn a profit on their emergency products side.  

[alex3610]

Interestingly, Spartan has lost money like mad on the emergency side of their business.  Then all of a sudden they have a $100 million line of credit and buy their biggest purchaser of chassis.  

 

My guess is once Smeal ran out of cash, Spartan had no choice but to buy them to keep selling a large enough quantity of chassis to be sustainable.  How Smeal got to where they are would be an interesting story to learn.

 

Supposedly the REV Group folks were first in line to buy, I'd go so far as to bet that Spartan had to outbid them to keep selling a lot of chassis.  The press release for the sale states that of Smeal's 2016 revenue of $100 million, $30 million of it was Spartan chassis.  That's probably in the range of 150 chassis alone.  Anyone think that Spartan is building any more than 250 chassis a year, 300 tops for emergency service use?

 

I'll be curious to see if Spartan somehow starts to turn a profit on their emergency products side.  

 

Smeal wasn't out of cash although it's impossible to say as they were privately held.  One thing they were out of was capacity.  They invested a lot in the last few years in both facility upgrades as well as streamlining processes.  Not to mention the purchase of UST and LTC.  They also have made a big marketing push and added some dealers which has in turn brought a significant uptick in orders.  The problem is that in a place like Snyder, NE there is a finite amount of skilled labor.  I know they are involved with a technical college about an hour away from Snyder because they realize they have more or less saturated the labor pool there and are hoping to bring in some fresh blood.  Smeal was profitable before they made these purchases but obviously making this sort of long term investment is going to impact your bottom line in the short term.

 

Spartan has done a lot of internal reorganization to try and make the emergency response division profitable again.  As has been said here Smeal was their biggest outside customer and after what happened with Rosenbauer I don't think they could afford to lose them.  The buzz around the industry was that REV wasn't done after they bought KME.  I still don't think they are.  Given Smeal's dependance on Spartan for chassis' that would have been an interesting deal to say the least.  Smeal & Spartan are a natural fit though.  As they stand today they both need each other to survive.  The connection with the Spartan aerial plant and LTC only makes it more of a no brainer.

 

I think your estimate of Smeal buying about 150 Spartan chassis' a year is about right.  I'll have to try and find out the total number that Spartan is doing, but I think you are in the neighborhood.

 

I'm curious to see who REV buys next.  Most in the business agree there are still a few too many players and a look at REV's ambulance group would tell you that they like to buy stuff.

[firescooby]

 

Smeal wasn't out of cash although it's impossible to say as they were privately held.  One thing they were out of was capacity.  They invested a lot in the last few years in both facility upgrades as well as streamlining processes.  Not to mention the purchase of UST and LTC.  They also have made a big marketing push and added some dealers which has in turn brought a significant uptick in orders.  The problem is that in a place like Snyder, NE there is a finite amount of skilled labor.  I know they are involved with a technical college about an hour away from Snyder because they realize they have more or less saturated the labor pool there and are hoping to bring in some fresh blood.  Smeal was profitable before they made these purchases but obviously making this sort of long term investment is going to impact your bottom line in the short term.

 

Spartan has done a lot of internal reorganization to try and make the emergency response division profitable again.  As has been said here Smeal was their biggest outside customer and after what happened with Rosenbauer I don't think they could afford to lose them.  The buzz around the industry was that REV wasn't done after they bought KME.  I still don't think they are.  Given Smeal's dependance on Spartan for chassis' that would have been an interesting deal to say the least.  Smeal & Spartan are a natural fit though.  As they stand today they both need each other to survive.  The connection with the Spartan aerial plant and LTC only makes it more of a no brainer.

 

I think your estimate of Smeal buying about 150 Spartan chassis' a year is about right.  I'll have to try and find out the total number that Spartan is doing, but I think you are in the neighborhood.

 

I'm curious to see who REV buys next.  Most in the business agree there are still a few too many players and a look at REV's ambulance group would tell you that they like to buy stuff.

Rumor is REV is buying Marion

[ACPD227]

Rumor is REV is buying Marion

 

That would suck Marion does great work. 

[BFD190]

I thought there were monopoly laws out there. I know companies skate all around this with subdivisions and re naming. I guesse at the end of the day sometime in the future when there's only two apparatus companies out there it might curb the whole lowest bidder nonsense.

[KENTucky]

Well, if REV bought Marion, that would be interesting...because Marion builds the cab shells FOR Spartan.  Think about that...REV would own Marion, who builds the cab shells for Spartan, who supplies the cabs and chassis to its own fire division, as well as its new subsidiaries, Smeal and UST.  Not to mention, Spartan now controls three completely different lines of aerials, one of which Smeal has been selling to Ferrara for years.  What a web!     

 

Kent Parrish

Louisville, KY

[datafire]

Marion builds cabs for more than Spartan. On their website it shows what appears to be Ferrara and Rosenbauer cabs.

[Will]

Marion builds cabs for more than Spartan. On their website it shows what appears to be Ferrara and Rosenbauer cabs.

Correct

[KENTucky]

Yes, Marion builds the cab shells for the Rosenbauer Commander and the Ferrara Ultra. 

 

Kent Parrish

Louisville, KY