Ooltewah

In an effort to improve its supply chain, Miller Industries Inc. announced Wednesday it is buying Southern Hydraulic Cylinder Inc. of Athens, Tennessee, for $17.5 million.

The Ooltewah-based tow truck maker said the purchase of Southern Hydraulic Cylinder will provide manufacturing and supplies of custom-built, welded hydraulic cylinders used in a variety of industries and should help boost company earnings within the first year of the acquisition.

Hydraulic component parts like those made at Southern Hydraulic Cylinder have had the longest lead times in the production process of Miller, William G. Miller II, the company's chief executive, said. Miller Industries is the world's biggest manufacturer of tow truck and towing equipment with annual sales in 2022 of $915.2 million.

"This is a significant step in improving the security of our supply chain through vertical integration," Miller said in an announcement Wednesday. "While this acquisition is immaterial to our consolidated financial results, the sourcing flexibility this acquisition provides us should have a positive impact on our ability to deliver finished goods to our customers, reduce our inventory balance and execute against our record backlog."

Miller said he hopes to improve the productivity of Southern Hydraulic Cylinder by introducing automation and improving production efficiency.

The purchase agreement announced Wednesday is still subject to certain closing adjustments and net working capital. Miller said even with the all-cash purchase, "We remain disciplined in our use of capital," and "We are a debt-averse company.

"Reducing our debt will be a top priority moving forward," Miller said.

Southern Hydraulic Cylinder was founded in 1989 and produces its hydraulic cylinders at its 53,000-square-foot production facility just off Interstate 75 in Athens. Jeff Zabo is the company's CEO and plant manager.

Southern Hydraulic Cylinder "has a strong heritage within the region" Miller said. The companies will "work together to promote economic growth in the area," he added.

"We look forward to working with our new customers and continuing the great quality and service they have come to expect," Miller said in a statement.

Contact Dave Flessner at [email protected] or 423-757-6340.