Federal Signal acquires New Way Trucks for $396M
Strategic acquisition expands Federal Signal's portfolio into the sanitation vehicle market, aiming for long-term growth and synergies.
Federal Signal Corporation (NYSE: FSS) has announced a significant move into the waste and recycling industry with the acquisition of Scranton Manufacturing Company, Inc., widely known as New Way Trucks. The deal is valued at an initial $396 million, with an additional $30 million allocated for manufacturing facilities. The agreement also includes a potential $54 million in performance-based earnouts, signaling a strong belief in the future growth of the combined entity.
The acquisition marks a strategic expansion for Federal Signal, a leader in public safety and well-being solutions. By integrating New Way Trucks, a prominent U.S. manufacturer of refuse collection vehicles, Federal Signal's Environmental Solutions Group will now have a significant footprint in the sanitation market. due to planned investments and integration costs, but the company projects an EPS accretion of $0.40-$0.45 by 2028.
Market reaction to the announcement was initially subdued, with Federal Signal's stock experiencing a slight downturn. However, the long-term strategic rationale appears compelling. The waste and recycling industry is known for its resilience to economic cycles, which will provide Federal Signal with a more stable and diversified revenue stream. The company anticipates achieving annual run-rate synergies of $15-20 million by the end of 2028, driven by leveraging its manufacturing expertise and distribution channels.
This acquisition is not just about market expansion; it's also a nod to the future of the industry. New Way's work in hydrogen Fuel Cell Electric Vehicle (FCEV) technology aligns with the growing trend towards decarbonization in waste management, positioning Federal Signal at the forefront of this technological shift. With a history of successful integrations, the company is confident in its ability to manage the acquisition effectively, maintaining a pro-forma net debt leverage ratio below 1.5x, .
Analysts have generally expressed confidence in the deal, with some adjusting their earnings estimates upward, reflecting a positive outlook on the company’s growth trajectory. The acquisition is a clear indication of Federal Signal's disciplined approach to M&A and its commitment to long-term value creation. is poised to solidify its position in the industrial services sector for years to come.