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Tennant Expands in Mexico with Dofesa Barrido Acquisition

Tennant Company TNC has strengthened its emerging market business by acquiring the assets of its prominent Mexican distributor, Dofesa Barrido Mecanizado (“Dofesa”). The buyout is in sync with the company’s existing inorganic growth strategy.

Dofesa has been the prime distributor for Tennant Company in Mexico for a long time now. After obtaining the assets of Dofesa, the company intents to enlarge its sales and service network in the booming economy of Mexico. It would be able to offer equipment, parts and services to a larger number of Mexican end-users, in a much more cost effective and prompt approach. In other words, Dofesa’s competent distributional facilities and productive workforce would help Tennant Company meet customer demand more efficiently. The acquisition is anticipated to boost the company’s sales in Monterrey, Mexico City, Puebla and Guadalajara in the near term. The deal was completed through the company’s Mexican subsidiary, Tennant Sales and Services of Mexico (“Tennant Mexico”). The transaction was closed on Sep 1. However, the company has not revealed any financial details yet.

Moving Forward

For some time now, growth of companies operating in the manufacturing and industrial sector is being affected by lower corporate investments. A fragile macroeconomic environment, due to factors like weak energy resource prices, the Brexit episode and sluggish domestic demand from emerging markets, has been weighing over the performance of U.S. manufacturing and industrial companies like Tennant Company. However, this Zacks Rank #1 (Strong Buy) stock is poised to grow on the back of strategic acquisitions, superior marketing and greater innovation.

On Jul 28, Tennant Company acquired the floor coatings business of Crawford Laboratories. The latest acquisition of Dofesa is expected to reinforce Tennant Company’s Mexican business by allowing it to cater to an expanded customer base through competitive marketing and sales services.

Over the last 60 days, the Zacks Consensus Estimate for Tennant Company has been revised upward both for 2016 and 2017. Share price of the company was $66.53 per share as of Sep 2. We expect investors to react positively to the news of the Dofesa buyout.

Other Stocks to Consider

Other equally ranked stocks within the same industry include DXP Enterprises, Inc. DXPE, Gorman-Rupp Co. GRC and Nordson Corporation NDSN.

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NORDSON CORP (NDSN): Free Stock Analysis Report
 
DXP ENTERPRISES (DXPE): Free Stock Analysis Report
 
TENNANT CO (TNC): Free Stock Analysis Report
 
GORMAN RUPP CO (GRC): Free Stock Analysis Report
 
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