The Toro Company entered into a definitive agreement to acquire The Charles Machine Works, the parent company of Ditch Witch and several other leading brands in the underground construction market, for $700 million in cash subject to certain adjustments set forth in the definitive agreement.

Bank of America Merrill Lynch and J.P. Morgan Chase Bank provided committed debt financing to Toro for the transaction.

The transaction is subject to regulatory approvals and other customary closing conditions and is currently anticipated to close before the end of Toro’s fiscal 2019 third quarter.

Headquartered in Perry, OK, Charles Machine Works designs, manufactures and sells a range of products to cover the full life-cycle of underground pipe and cable, including horizontal directional drills, walk and ride trenchers, utility loaders, vacuum excavators, asset locators, pipe rehabilitation solutions and after-market tools.

“The addition of Charles Machine Works will further strengthen our portfolio of market-leading brands supported by talented employees, a commitment to innovation, a best-in-class dealer network and long-standing customer relationships,” said Richard M. Olson, Toro’s chairman and CEO. “As an organization, Charles Machine Works aligns well with and will contribute to our own strategic priorities of profitable growth, operational excellence and empowering people. The company expands our business in a meaningful way in an adjacent category we know well through our own specialty construction business and in a market that is attractive given the potential for growth in addressing both aging infrastructure that is currently in place and new infrastructure that will be needed to support next generation technologies like 5G.”

Toro expects to finance the transaction with a combination of cash on hand and debt, including from additional financing arrangements and borrowings under its existing credit facility. The all-cash purchase price of $700 million represents a multiple of approximately eight times Charles Machine Works’ calendar year 2018 EBITDA, including $30 million of anticipated annual run-rate cost synergies phased in over three years, that Toro intends to achieve through opportunities in purchasing, manufacturing best practices and administrative efficiencies. Toro expects the transaction to be immediately accretive to EPS excluding purchase accounting adjustments and transaction related expenses.

J.P. Morgan Securities acted as financial advisor to Toro, while Fox Rothschild and Latham & Watkins acted as its legal counsel. McAfee & Taft acted as Charles Machine Works’ legal counsel.

The Toro Company provides innovative solutions for outdoor environments, including turf maintenance, snow and ice management, landscape, rental and specialty construction equipment and irrigation and outdoor lighting solutions.