Titan Machinery, a network of full-service construction and agricultural equipment stores, and a major Case dealership has entered into a definitive purchase agreement to acquire J.J. O’Connor & Sons, the largest Case dealership in Australia for $63 million in cash, subject to final working capital and closing adjustments. O’Connor generated revenue of U.S. $258 million and EBITDA of $21.4 million.
O’Connor, founded in 1964, is the largest Case IH dealership group in Australia. O’Connor delivers a wide range of new and used equipment, parts and services through its 15 dealerships and one parts location located in the southeastern Australian grain belt, which includes the regions of Victoria, New South Wales, and South Australia. Also, O’Connor is a distributor for more than 25 short-line equipment brands, providing a range of complementary offerings to its core Case IH line of products, and has a strong parts and service business that provides a reliable recurring revenue stream.
On a consolidated basis, O’Connor achieved a gross margin of approximately 18.7-percent in the full fiscal year 2023, and generated a total pre-tax margin of approximately 7.2 percent, representing a margin profile that is consistent with Titan’s.
“We are our pleased to announce our definitive agreement to acquire O’Connor’s, Australia’s leading Case IH dealership group,” said David Meyer, Titan Machinery’s chairman and CEO. “The transaction marks our entry into the Australian agriculture market, as we continue to seek opportunities for Titan to expand its reach, both domestically and abroad. O’Connor's operating metrics, core values, and customer-centric focus align with our own, making them a great partner for our entry into the Australian agriculture market, which is benefiting from strong fundamentals that are being driven by enhanced productivity, economies of scale, and farmer profitability.
“We are very impressed with the O’Connors’ senior management team, led by CEO Gareth Webb, which has been operating the business exceptionally well over the last five years after succeeding the retiring major shareholders Dennis and Mark O’Connor. It’s the strong management team, along with their great track record of retailing and supporting the high horsepower Case IH product line up that makes this a very compelling acquisition. O’Connor’s has established itself as a respected leader in the region, earning a reputation for its deep expertise and employee and customer-centric focus. Their long-term business relationships, built over nearly six decades, demonstrates their commitment to excellence. The O’Connors team has a proven track record of driving organic growth, M&A execution, and profitability, and we believe that there is additional opportunity to build upon their growth formula and capitalize on operational synergies across Titan’s global footprint as we integrate the business.”
O’Connor is the leading distributor of Case IH agricultural equipment in Australia, with a primary focus on high horsepower cash crop production equipment. With 16 locations in the grain belt region in southeastern Australia, O’Connor provides an end-to-end offering to customers including new and used equipment, parts and services, and other value-added service offerings.
Key similarities to Titan
O’Connor's focus on high-horsepower cash crop production equipment in Australia’s grain belt region is being supported by the combination of increasing precision ag technology adoption and farm expansion. These trends are similar to what Titan is experiencing in its domestic agriculture business and coupled with O’Connor's strong management team. Australia’s native English language and comparable legal system, the transaction is expected to allow for a harmonious integration.
Titan expects to enhance and expand upon O’Connor's M&A strategy. O’Connors began a growth acceleration in 2018 following a focused acquisition strategy that resulted in acquiring nine additional locations in the subsequent five-year period. The Australian market is in the early stages of dealer consolidation. Through a combined approach, leveraging O’Connor's existing leadership team and Titan’s broader capabilities and resources, the company believes it is well-positioned to capitalize on continued acquisition opportunities.
The combined Titan Machinery enterprise, along with O’Connor's proforma run rate results, would equate to approximately $2.9 million in revenue, and $5.20 in diluted earnings per share on an annualized basis, based on the midpoint of Titan’s full fiscal year 2024 guidance ending in January 2024.
The acquisition is subject to customary closing conditions and is expected to close in the fourth quarter of calendar 2023.
Titan Machinery, headquartered in West Fargo, N.D., is No. 62 on the RER 100.
