How Metso and McCloskey came together

Mergers and acquisitions are no stranger to the aggregate industry.

One of the more noteworthy 2019 transactions involving equipment suppliers was Metso’s purchase of McCloskey International, the Canadian-based manufacturer of mobile crushing and screening plants. Metso completed the acquisition of McCloskey in October after announcing the deal back in June, bringing two highly visible brands together.

Ahead of the deal, Metso scouted various suppliers who might be a match for its growth strategy. Ultimately, the company identified and pursued McCloskey as the optimal partner for continued growth.

“From a customer perspective, one of the areas where we have not held a pole position in global crushing and screening is mobile screening,” says Markku Simula, president of Metso’s aggregate equipment business area. “We have a fairly good range of mobile screens at Metso, but it’s not a full offering. It doesn’t represent all of the possible customer segments.”

Synergies

As Simula describes, Metso’s offering is geared more toward heavy users such as aggregate producers. Metso has not, however, had tremendous reach to contractors.

Similarly, Metso previously had a few gaps in its geographic reach. Simula expects McCloskey to fill some of those gaps.

“Before the McCloskey acquisition, we were quite well-represented in Europe but not quite as well-represented in North America,” Simula says. “We also had a hole in Europe in Northern Ireland, especially in mobile screening.”

Metso’s acquisition of McCloskey comes on the heels of McCloskey’s 2018 acquisition of Lippmann-Milwaukee. That Metso brings McCloskey into the company means Lippmann comes with it.

That’s three established industry brands under one roof. The McCloskey and Lippmann brand names will live on, and they’ll be managed independently under Metso.

“Customers will see the McCloskey they have seen in the past,” Simula says. “McCloskey products will be distributed through McCloskey dealers. Metso will continue to be a brand of its own, and Metso products will continue to be distributed through Metso distributors.”

Toni Laaksonen, senior vice president of McCloskey, reinforces the fact that Lippmann will retain its brand independence.

“McCloskey had Lippmann as a separate brand before Metso acquired McCloskey,” says Laaksonen, a Metso executive who will be relocating to Canada to manage the global McCloskey and Lippmann businesses. “Lippmann has had its own distribution channel, and they have been developing the channel. We’ll continue with that allotment, and we are now strengthening the Lippmann effort.”

Equipment to expect

One benefit of the combination for Metso and McCloskey customers is expanded product development. Metso plans to soon expand the number of offerings to both brands’ distribution networks.

“We are introducing more products because we have stronger R&D teams,” Simula says.

To Simula, Metso’s strength is in crushing while McCloskey’s is in screening. He sees the acquisition as an opportunity to bolster Metso’s screening line and McCloskey’s crushing offerings.

“If I were a McCloskey distributor, I would expect the offering on the crushing side would be stronger going forward,” Simula says. “If I were a Metso distributor, I would expect to see more of the mobile screening products and different sizes and classes.”

Metso has already developed a number of new products that will be available in the first quarter of 2020 to the North American market, Simula adds. He anticipates McCloskey and Lippmann to introduce Metso-influenced equipment in the new year, as well.

New McCloskey mobile cone crushers are one development customers can expect to see from the Metso-McCloskey combination.

“One that we started before the acquisition was a commercial partnership with McCloskey to supply a cone crusher,” Laaksonen says. “It was somewhat redesigned for McCloskey purposes, and they are fully branded for McCloskey. They’re starting to supply the first plants this year, and next year there will be several available for the market.”

Lippmann users also have new equipment to look forward to.

“There will be new portable plants coming from the Lippmann factory for these new cone types,” Laaksonen says. “These didn’t exist previously.”

Other opportunities

Yet another advantage McCloskey can offer Metso is a factory footprint. Metso does not have such a presence in North America, but McCloskey, with its worldwide office situated in Keene, Ontario, Canada, provides unique access to the world’s top market.

“Having a local presence is meaningful for us and increases our future capabilities significantly in North America,” Simula says.

Looking ahead, Simula anticipates McCloskey facilities will largely support McCloskey’s needs, but he won’t be surprised if some Metso equipment is someday manufactured in McCloskey factories.

“And vice versa,” he says. “I would expect it to be 50-50.”

Additional M&A activity

Although Metso’s acquisition of McCloskey is a sizable one, it is not the only transaction of significance the company is currently working through.

Metso also came to terms in 2019 with Outotec, a Finnish company, on a merger deal that will create a combined company serving the aggregate, minerals and metals industries.

The combined company, comprising Metso Minerals and Outotec but excluding Metso Flow Control, will be named Metso Outotec. Combined, the two companies had illustrative sales in 2018 of about $4.4 billion – and about $4.7 billion (4.2 billion euros) when Metso’s acquisition of McCloskey is factored in.

Metso Flow Control will be a pure-play listed entity under the name of Neles, with 2018 sales of about $668 million.

“Metso and Outotec are expected to be merged in the second quarter of 2020,” Simula says.

Simula doubts Metso will pursue any other major deals until the Outotec merger is complete. The growth the company will pursue going forward will be more of the organic variety, but additional mergers and acquisitions could be in Metso’s future in the years to come.

“Last year we acquired a Swedish-based company (P.J. Jonsson och Söner) that is focusing on heavy-duty mobile crushers and screens,” Laaksonen says. “Their offering range is already fully electric. It’s an interesting addition.”

Diesel versus electric

For Metso, electric plants – or, at least, diesel-electric plants – are more likely to become prevalent in the company’s offerings in the years to come.

In North America, diesel engines are still the preferred choice in crushing and screening plants. But a change is slowly happening here in the United States, where emerging noise, dust and emissions regulations present new challenges.

“There seem to already be states that are demanding more electric versions of equipment,” Laaksonen says. “We have traditionally been supplying diesel engines.”

The regulations here in the U.S. aren’t as strict as they are in some other countries, Laaksonen adds, but more producers and contractors are opening up to electric power as an option.

“We do offer a very extensive range of both electric and diesel plants,” Simula says. “Going forward, if you look at our total sales, it’s still significantly weighted on the diesel side. But you don’t have to be a magician to see that, in the future, sales are going to be more on the electric side.

“I would expect 15 to 20 years from now we will still carry an extensive range of diesel plants,” Simula adds. “I doubt it will disappear, but surely more development will be on the electric side.”

Mobile versus stationary

Simula and Laaksonen also see a trend in the U.S. toward mobility due to permitting challenges.

“Permitting can take a huge amount of time,” Laaksonen says. “Instead of applying for a permit for a stationary plant, it can be easier to get the permit for the mobile plant to get production up and running quickly.”

Simula concurs, characterizing the trend toward mobility as ongoing for the last 15 to 20 years.

“Mobile crushing has been taking over the stationary plants,” he says. “The real reason is that it offers a lot more flexibility to the customer – especially if you are a contractor or if you have a quarry. A contractor or even a quarry can [have] a little bit more flexibility with mobile crushing and mobile screening.”

According to Simula, the annual growth rate of mobile crushing plants far exceeds the growth rate of crushers in stationary applications.

“The growth rate in mobile crushing has been an average growth rate,” he says. “Mobile growth has been something like 5 or 6 percent for the last 15 years. If you look at the stationary crushing market, the growth rate has been something like 1 percent.”

The growth market

One place that’s been a growth market for mobile plants in recent years is North America.

“The North American market has been quite favorable the last couple of years,” Simula says. “This year, though, the market has been a bit softer, and our distributors are maybe working with inventory rather than filling inventories. Also, I see that the customer has been a little cautious in making investments.”

As Simula looks to 2021 and beyond, his confidence in North America remains high.

“Going forward, I would expect the U.S. and Canadian market should both grow fairly strong within the coming years,” he says. “It’s driven by roadbuilding, construction and by fixing old infrastructure.”