SPAR: Management Discusses Agreement to Acquire Utilimaster Corp.

Spartan Motors, Inc. ( SPAR | Quote | Chart | News | PowerRating) has reached an agreement to acquire Utilimaster Corporation from John Hancock Life Insurance Company, a unit of Manulife Financial Corporation ( MFC | Quote | Chart | News | PowerRating) in an all-cash transaction valued at approximately $45 million. Spartan will pay $50 million in cash, less a net working capital adjustment. In addition, Spartan has agreed to pay contingent earn-out payments of up to $7 million based primarily on the Utilimaster operation exceeding revenue milestones. The acquisition will be financed with a combination of cash and debt.

Utilimaster is a manufacturer of specialty vehicles made to customer specifications in the delivery and service market, including walk-in vans and hi-cube vans, as well as truck bodies. The majority of Utilimaster's revenues are in the delivery and service market, which includes walk-in vans for the package delivery, bakery/snack delivery and linen/uniform rental markets. Its remaining revenues are attributable to commercial truck bodies, along with service, parts and accessories.

Spartan said the acquisition of Utilimaster is expected to add approximately $105 million in annualized revenues and be slightly dilutive to earnings in the first full year and accretive by year two. Utilimaster has approximately 550 employees and more than 550,000 sq. ft. of manufacturing capacity at its corporate headquarters in Wakarusa, Indiana.

Joe Nowicki, CFO of Spartan Motors, commented in a conference call, "This acquisition is a significant step towards diversification of our end markets and driving our future growth. Diversification is important because it reduces our risk and dependence on one or two markets. It is great fit from many perspectives that include products, culture, complimentary sectors and market potential. Their management also shares a similar culture of teamwork and innovation."

He continued, "Utilimaster has a strong brand with a number of blue-chip customers such as FedEx, UPS, Frito-Lay, Sara Lee and other industry leaders that rely on their products. In fact, Utilimaster commands more than a 60% market share position in the step-van segment."

Mr. Nowicki noted, "The delivery and service market provides a transformative opportunity for us, much as we have experienced with fire trucks and RVs."

John Sztykiel, President and CEO of Spartan Motors, added, "Utilimaster hit our targets for cultural fit, market potential and financial metrics, including sustained profitability and market share gains amidst an industry that has declined by 50 percent due to macro-economic conditions. We considered numerous acquisition opportunities, while looking at more than 80 companies over the last 12 months, and Utilimaster was by far the best fit for us. We gain entry into the North American delivery and service market with a strong brand and a number of opportunities for expansion.

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