3 Keys From Alamo Group’s Latest Acquisition
Plunging boldly into the world of sawdust and timber, Alamo Group (NYSE: ALG) spent a solid chunk of cash in 2019 acquiring Morbark Holdings Group, LLC, a forestry equipment manufacturer. The biggest of Alamo Group's three 2019 acquisitions, Morbark added a whole new sector to its existing line of municipal cleanup vehicles. A few days ago, Alamo Group publicly released its Form 8-K/A filing with the SEC, revealing several important details about Morbark. The document features some data helping to show stock investors whether the acquisition of the forestry vehicle company will let Alamo take root in the fertile soil of profitable new business opportunities.
Alamo spent $325 million sealing the deal with Morbark, diversifying its product lines into a fresh field of industrial manufacturing. Morbark fabricates a variety of forestry-related equipment, including everything from chippers and flails to help manage biomass and forest health, to highly maneuverable wheel loaders useful for logging in rugged terrain.
According to the Food and Agriculture Organization, harvesting and sale of wood products has reached its highest level since monitoring began in 1947. Wood product trade jumped 11% between 2017 and 2019 alone, driving demand for machinery to extract timber for industrial use. Wood pellet production grew by a similar amount in just one year to meet mounting bioenergy quotas. Pellet demand fits neatly with Morbark's drum chippers and similar equipment, which turn branches and other wood smaller than sawtimber into salable chips or sawdust.
Source Fool.com
