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Manitowoc acquires H&E crane business

Manitowoc is to acquire the crane business of Louisiana based equipment distributor and rental company H&E Equipment Services.

Manitowoc will pay around $130 million for the business, funded by a combination of cash on hand and the manufacturer’s existing debt availability. The transaction is expected to close in the fourth quarter, subject to the usual closing conditions and regulatory approvals.

The acquisition of H&E’s crane business will include the crane rental operations and is intended to expand the Manitowoc’s ability to provide rental equipment as well as handle the sale and support of its products on a more direct basis. H&E’s crane business operates from 11 full service branches.

Chief executive Aaron Ravenscroft, said: “Over the past few quarters, we have communicated that our intent is to grow through four strategic priorities, one of which is acquisitions focused on aftermarket. The purchase of H&E’s crane business is the next step in our journey to grow the less cyclical part of our business. H&E has a long history and excellent reputation for serving the lifting industry, and we look forward to welcoming the H&E crane team to Manitowoc.”

H&E chief executive Brad Barber, added: “H&E has become one of the largest rental equipment companies in the U.S. by maintaining a commitment to growth. The sale of our crane business to Manitowoc represents a transformative event in H&E’s continued efforts to increase its focus in the equipment rental business, while positioning us for future growth opportunities. We believe Manitowoc will provide further career opportunities for our crane employees and will also continue to offer first-class service to existing crane customers.”

H&E - originally Head & Engquist - is one the longest serving Grove crane distributors, its relationship with the company dates back to the early 1970s, if not earlier. It has also handled Manitowoc crawler cranes since 1998, when it acquired Dallas based Martin Equipment. Head & Engquist was originally a classic crane and excavator distribution company - Grove and Komatsu - covering parts of Louisiana, including New Orleans and Baton Rouge. In the past 25 years or so it has been expanding into other regions and extending the range of equipment it offers, as well as building its rental fleet. It made a big step forward in 2007 when it acquired J.W. Burress, a Grove dealer based in Roanoke, Virginia.

Today it operates from 105 locations throughout the West Coast, Intermountain, Southwest, Gulf Coast, Mid-Atlantic and Southeast regions, selling and renting a wide range of equipment, including cranes, aerial work platforms and telehandlers.

Vertikal Comment

This is an interesting move, and although the indications were there, somewhat surprising. It moves Manitowoc closer to its ultimate customers and end users, while adding control over its sales and rental chain. It will certainly help smooth the ups and downs of what has always been a cyclical market. For example, last year many manufacturers suffered drastic reductions in revenues, including order cancellations, even though their main customers - rental companies - never experienced the same levels of volume drop offs, and quickly bounced back. It will allow Manitowoc to smooth capacity, placing equipment into the rental fleet when slow, creating good used equipment and a buffer stock when demand picks up again.

The strategy follows a growing trend among companies in the marine and loader crane market that have been busy increasing the services side of their businesses over the past five years, based on the fact that this side of the business is not only less cyclical, but also carries higher margins.

A key factor will be how the company’s national crane rental customers react, and how Manitowoc handles territories where it risks becoming a significant competitor with them. Although the H&E rental business tends to follow the classic AED distributor rental model, based on bare lease and longer term rentals, which is a different market to the full service rental operations of companies such as Maxim or the ALL group etc… while there might be some overlap, it is likely to be marginal and may well result in less competition than from the existing H&E operation. Manitowoc is also likely to prove to be a more benign rental operator given its main focus.

Interesting times.