Trimble Acquires TMW Systems

Trimble Navigation (TRMB - Analyst Report) recently announced that it has acquired privately-held TMW Systems in an all-cash deal. The acquisition, for which the company will be spending $355 million, is expected to close during the fourth quarter, subject to customary closing conditions.

Beachwood, Ohio-based TMW is a specialized software maker for transportation and logistics industries. Its software not only helps in storing and analyzing data but also automates the processes involved in the movement of goods, helping to improve operational efficiency. The company has annual revenues of roughly $96 million.

Upon the completion of the deal, TMW’s transportation software will be added to Trimble’s suite of mapping, tracking and surveying equipment. TMW Systems will continue to operate as an independent entity and will be reported within Trimble's Mobile Solutions (TMS) segment.

The acquisition will enable Trimble to provide improved fleet tracking technologies. The integrated solution can be used by managers for better decision making and operational efficiency.

Currently, Trimble and TMW Systems operate together on a number of fleets, wherein TMW’s enterprise software is already integrated within Trimble’s mobile solutions. According to management, the acquisition will allow both the companies to jointly serve more than 3,000 fleets around the world.

Though management stated that the transaction is expected to be slightly dilutive to Trimble’s non-GAAP earnings by 1 to 3 cents per share in the fourth quarter, it expects a 12 to 14 cents accretion in 2013.

Trimble is quite active on the mergers and acquisitions (M&A) front. The company’s acquisitions have helped it to build a desired portfolio, enhance its product line and expand top-line growth. Acquisitions have also been positive for gross margins, while adding operating leverage. Earlier this year, Trimble acquired a 3-D modeling software platform from Internet search giant Google (GOOG - Analyst Report). The purchase price for the software was not revealed.

Trimble Navigation, Ltd. is an original equipment manufacturer (OEM) of positioning, surveying and machine control products. In the last-reported second quarter of 2012, TMS segment revenue of $81.4 million was up 3.9% sequentially and 102.4% from the comparable quarter of 2011. Trimble has been putting in a lot of effort, disposing off non-focus areas and building a desired portfolio through successive acquisitions. The acquisition is expected to further enhance the performance of commercial vehicles and fleets, driving revenue in this segment.

Trimble’s solid portfolio (enhanced by acquisitions), strong market position and strategic partnerships are expected to drive both revenue and earnings over the next few quarters.

Currently the shares of Trimble retain a Zacks #3 Rank (short-term “Hold” rating).