Twin Disc to acquire Veth Propulsion

JUNE 13, 2018 — Racine, WI, based Twin Disc, Inc. (NASDAQ:TWIN) reports that it has entered into a definitive agreement to acquire Papendrecht, Netherlands, headquartered Veth Propulsion Holding, B.V. and its wholly-owned subsidiaries.

The purchase price is approximately $58.6 million (EUR 49.7 million) plus net cash, with potential adjustments based on Veth Propulsion's working capital as of the closing date, and will be financed through a combination of cash and new debt facilities. Additional consideration of up to approximately $3.9 million (EUR 3.3 million) will be paid in Twin Disc common stock if certain earn-out provisions are met. The acquisition is expected to be completed in July 2018, subject to typical closing conditions.

Veth Propulsion is a manufacturer of azimuth rudder propellers, thrusters and generator sets, and is a supplier and repairer of 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," said John H. Batten, President and CEO of Twin Disc. "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."

"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 Propulsion'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.