425: Terex & REV Group Merge, Terex Exits Aerial Segment

Terex Corporation and REV Group, Inc. announce a definitive merger agreement, creating a U.S.-centric specialty equipment manufacturer, while Terex plans to exit its Aerial Segment.

Summary

• Terex and REV Group have entered into a definitive agreement to merge in a stock and cash transaction.
• Terex shareholders will own 58% and REV shareholders 42% of the combined company, with REV shareholders also receiving $425 million in cash consideration.
• Simon Meester, Terex's President and CEO, will serve as CEO of the combined company, supported by a proven management team.
• The Board of the combined company will comprise seven directors from Terex and five from REV Group.
• The merger is expected to be completed in the first half of 2026, subject to customary closing conditions.
• Terex plans to exit its Aerial Segment, evaluating a potential sale or spinoff, to significantly reduce exposure to cyclical end markets.
• The combined company aims to deliver at least $75 million in annual synergies, with approximately half expected within the first 12 months post-closing.
• On a pro forma basis, the merged company is expected to provide a mid-teens adjusted EBITDA earnings profile in fiscal 2025, near the top end of the specialty equipment peer group.
• At closing, the combined company is expected to have a strong balance sheet and liquidity position with approximately 2.5x leverage on a pro forma basis, with further deleveraging opportunities post-Aerial business exit.
• After the Aerial's exit and adding synergies, the pro forma company is expected to deliver EBITDA margins of about 14% with a cash conversion of approximately 85% on $5.8 billion in revenue.
• Approximately 85% of the combined revenue will be generated in North America, with the vast majority from products made in the combined U.S. manufacturing network.
• The portfolio will be well balanced, with about 40% of sales related to specialty vehicles and the remainder split between environmental solutions and materials processing.
• Nearly 60% of revenue is associated with essential services like emergency vehicles and waste collection, which are less subject to economic fluctuations.
• REV Group has a total backlog of approximately $4.5 billion, with $4.2 billion in its Specialty Vehicle segment and $300 million in its Recreational Vehicle segment, representing a 2to 2.5-year backlog for fire trucks and ambulances.
• Terex reported solid Q3 2025 earnings, delivering $1.50 of EPS on sales of $1.4 billion, with a cash conversion of 200%, and is maintaining its full-year outlook.

Sentiment

Score: 8

Explanation: The filing announces a transformative merger and strategic divestiture, presenting a highly positive outlook for the combined entity with significant synergies, reduced cyclicality, strong financial metrics, and growth opportunities in resilient markets. The tone is confident and forward-looking, despite acknowledging integration risks.

Positives

• The merger creates a U.S.-centric large-scale specialty equipment manufacturer with iconic leading brands serving highly resilient and growing end markets.
• The combined company is expected to unlock significant readily achievable annual synergies of at least $75 million, with half realized within 12 months post-closing.
• The transaction is anticipated to result in stronger, more predictable earnings and associated free cash flow, supported by a low capital intensity profile.
• The merged entity is projected to achieve a mid-teens adjusted EBITDA earnings profile in fiscal 2025 on a pro forma basis, positioning it near the top end of the specialty equipment peer group.
• A strong balance sheet and liquidity position are expected at closing, with approximately 2.5x leverage pro forma, offering further deleveraging opportunities upon the Aerial business exit.
• The planned exit of the Aerial Segment will significantly reduce exposure to cyclical end markets, enhancing the overall resilience and predictability of the combined business.
• The portfolio will be diverse and balanced, with approximately 85% of revenue generated in North America and nearly 60% tied to essential services, providing economic cycle resiliency.
• Expected accelerated growth in the utility market, driven by AI, data centers, and U.S. power grid upgrades, along with continued growth from infrastructure spending globally.
• The opportunity to extend the 3rd Eye digital platform into fire and ambulance verticals is expected to drive revenue synergies and innovation.
• REV Group's substantial $4.5 billion backlog, particularly the 2to 2.5-year backlog for fire trucks and ambulances, provides strong revenue visibility and stability.
• Terex delivered strong Q3 2025 results, including $1.50 EPS, $1.4 billion in sales, and 200% cash conversion, while maintaining its full-year outlook.

Negatives

• The transaction involves risks related to the timely receipt of regulatory, shareholder, and other approvals, which could delay or prevent closing.
• There is a risk that the anticipated benefits and synergies from the transaction may not be fully realized or may take longer to achieve than expected.
• The transaction may be more expensive to complete than initially anticipated due to unexpected factors or events.
• The issuance of additional Terex shares in connection with the merger could result in dilution for existing Terex shareholders.
• Management's attention and time will be diverted to the transaction and the strategic options for the Aerials segment, potentially impacting ongoing business operations.
• There is a risk that the exploration of strategic options to exit the Aerials segment may not be successful or that any transaction for it is not on favorable terms.
• Potential for adverse reactions from customers, employees, or other business partners due to the announcement, pendency, or completion of the transaction.

Risks

• The occurrence of any event, change, or other circumstance that could give rise to the right of one or both parties to terminate the definitive merger agreement.
• The possibility that the transaction does not close when expected or at all because required regulatory, shareholder, or other approvals and conditions to closing are not received or satisfied on a timely basis or at all.
• The risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, trade policy, laws and regulations, and the degree of competition.
• Any failure to promptly and effectively integrate the businesses of Terex and REV Group.
• The possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events.
• Reputational risk and potential adverse reactions of Terex's or REV Group's customers, employees, or other business partners.
• Terex's issuance of additional shares of its capital stock in connection with the transaction.
• The risk that Terex's exploration of strategic options to exit its Aerials segment may not be successful or that any transaction entered into with respect to Terex's Aerials segment is not on favorable terms.
• The diversion of management's attention and time to the transaction and the exploration of strategic options with respect to the Terex Aerials segment and from ongoing business operations and opportunities.
• The outcome of any legal proceedings that may be instituted against REV Group or Terex in connection with the transaction.
• Risks and contingencies detailed in Terex's and REV Group's respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the U.S. Securities and Exchange Commission.

Future Outlook

The combined company is expected to achieve a mid-teens adjusted EBITDA earnings profile in fiscal 2025 on a pro forma basis, supported by at least $75 million in annual synergies, with half anticipated within 12 months post-closing. A strong balance sheet with 2.5x leverage at closing is projected, with further deleveraging opportunities after the Aerial business exit. Growth is anticipated from urban expansion, population growth, electrical grid upgrades driven by AI and data centers, and ongoing infrastructure investments. The 3rd Eye digital platform is identified as a significant growth opportunity, with potential for extension into fire and ambulance verticals. Industry forecasts indicate public power and independently owned utilities CapEx are expected to grow between 8% and 15% per year through 2030.

Management Comments

• "We are announcing the merger of two great companies to create a U.S.-centric large-scale specialty equipment manufacturer with iconic leading brands serving highly resilient and growing end markets." Simon Meester, Terex President & CEO
• "Our teams have developed a detailed plan to deliver at least $75 million in annual synergies contributing to the highly attractive financial profile of the new company." Simon Meester, Terex President & CEO
• "This exit [of Aerial Segment] will significantly reduce our exposure to cyclical end markets." Simon Meester, Terex President & CEO
• "Combining with Terex is a unique opportunity that we believe will create meaningful value for our shareholders." Mark Skonieczny, REV Group President & CEO
• "We are merging two strong companies to produce a combination that will clearly be created in the sum of the parts." Simon Meester, Terex President & CEO
• "The pro forma end market profile will be less cyclical than ever before in our history." Simon Meester, Terex President & CEO
• "We are still in the early innings of our strategic transformation with significant synergies to deliver and growth opportunities across each of our end market verticals to continue to create shareholder value beyond this merger." Simon Meester, Terex CEO
• "We think that the Aerial's journey is very well documented on how it performs through the cycle. Our Aerial's business has a strong brand, strong team, strong footprint, strong legacy... We are convinced that there will be plenty of suitors out there will recognize the through-cycle value that we believe the Aerial's business will bring to their portfolio." Simon Meester, Terex CEO
• "This transaction allows our shareholders to continue to participate in that [REV Group's previously stated EBITDA targets] as you've seen in our quarterly results and the fact that we've been ahead of the targets for 2027." Mark Skonieczny, REV Group CEO
• "The $75 million run rate going into 2028. We think 50% is -will be achieved within 12 months after closing. We have very similar operating systems, very similar culture. So we do think we will hit the ground running, and we have a good pipeline." Simon Meester, Terex CEO
• "We're basically -with this merger, we wanted to rebaseline the company... And what we want to pursue is a more predictable, much less cyclical kind of earnings profile." Simon Meester, Terex CEO

Industry Context

The merger of Terex and REV Group, coupled with Terex's planned exit from its Aerial Segment, represents a strategic shift towards a more resilient and less cyclical business model within the specialty equipment manufacturing sector. This aligns with a broader industry trend where companies seek to de-risk portfolios from highly cyclical construction markets. The combined entity's focus on essential services (emergency vehicles, waste collection) and infrastructure-related markets (utilities, materials processing) positions it to capitalize on secular tailwinds such as population growth, urban expansion, the increasing demand for power grid upgrades driven by AI and data centers, and government infrastructure spending. These markets offer more stable demand compared to general construction, providing a competitive advantage. The emphasis on integrating digital solutions like the 3rd Eye platform also reflects the growing importance of technology and data in enhancing operational efficiency and safety across industrial equipment.

Comparison to Industry Standards

• The combined company's expected mid-teens adjusted EBITDA earnings profile in fiscal 2025 on a pro forma basis is stated to be "near the top end of the specialty equipment peer group."
• REV Group's backlog for fire trucks and ambulances, spanning 2 to 2.5 years, is consistent with industry trends where backlogs for emergency equipment manufacturers increased across all brands during the pandemic.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders (Terex & REV Group): Both sets of shareholders will participate in the potential upside of the combined company. REV shareholders will also receive $425 million in cash consideration. Terex shareholders face potential dilution from the issuance of additional shares.
• Employees: The combined team is expected to be energized and capable of capitalizing on opportunities. Synergies may lead to consolidation of corporate activities and elimination of duplication, potentially impacting some roles.
• Customers: Expected to benefit from a stronger, more competitive combined company, product innovation, and greater efficiency. Enhanced situational awareness and safety features from the 3rd Eye digital platform are anticipated.
• Suppliers: Sourcing savings will be pursued, potentially leading to renegotiated terms or changes in the supplier base to achieve a more resilient and cost-efficient supply chain.
• Regulatory Authorities: The merger is subject to customary closing conditions, including required regulatory approvals, which will involve scrutiny from relevant authorities.

Next Steps

• Complete the merger in the first half of 2026, subject to customary closing conditions and regulatory approvals.
• Execute the detailed plan to deliver at least $75 million in annual synergies, with 50% expected to be achieved within 12 months post-closing.
• Evaluate and execute the sale or spinoff of the Aerial Segment to reduce cyclical exposure.
• File a Registration Statement on Form S-4 with the SEC to register the shares of Terex common stock to be issued in connection with the transaction, including a joint proxy statement/prospectus.
• Continue to assess the effectiveness of the portfolio, including the RV business, for future strategic decisions.

Key Dates

Recommendation

The merger of Terex and REV Group, coupled with the planned exit of the cyclical Aerial Segment, represents a highly strategic and transformative move. The combined entity is projected to achieve significant annual synergies of at least $75 million, a mid-teens adjusted EBITDA margin (near the top of its peer group), and a more predictable, less cyclical earnings profile. The focus on resilient end markets like essential services, utilities, and infrastructure, along with a strong backlog from REV Group, provides a robust foundation for sustained growth. The strong balance sheet and flexible capital structure further enhance its investment appeal. This rebaselining of the company's portfolio is expected to unlock substantial shareholder value and presents a compelling long-term investment opportunity.

Keywords

Terex, REV Group, Merger, Acquisition, Specialty Equipment, Aerial Segment, Divestiture, Synergies, Financial Performance, Corporate Governance, Risk Management, ESG, Materials Processing, Environmental Solutions, Specialty Vehicles, Fire Trucks, Ambulances, Refuse Collection, Utilities, Infrastructure, North America, NYSE: TEX