Finland’s Konecranes is to acquire the Demag overhead crane and Gottwald port crane divisions from Terex Corporation after the two companies agreed to end all merger talks in the wake of a high value bid by China’s Zoomlion.
Under the deal Konecranes is paying $1.3bn for the two Terex businesses, made up of $820m in cash and 19.6 million in newly issued shares in Konecranes, giving Terex a 25% stake in the expanded Konecranes business and the right to nominate two directors.
The deal is expected to complete at the end of the year, but can be called off any time up to the end of May – with a $37m penalty – if a deal is struck with Zoomlion to acquire the Terex business as a whole before then.
Terex CEO John Garrison said: “The sale of the MHPS business to Konecranes is good for our customers, team members and shareholders. This transaction is expected to be accretive to Terex earnings per share and preserves the strategic logic for the original merger of equals.
“In addition, it will significantly reduce Terex’s debt levels, improves our balance sheet and gives us longer term financial flexibility to invest in our business and buy back shares. As a 25% shareholder of Konecranes, Terex will also be able to share in the dividends, synergies and economic upside of the combined business.”
Konecranes handled revenues of around $2.41bn last year; the Terex port and material handling division will add around $1.57bn. The enlarged business will have a workforce of 19,000 people.
Garrison added: “This new transaction structure locks in the benefits of the MHPS sale while preserving the ability for Terex to continue discussions with Zoomlion on a potential sale of the company at $31 per share with the MHPS business or, alternatively, for the sale of Terex without the MHPS business.”
Critically, a pared down Terex free from its loss-making materials handling unit and with lower debt could make a merger with Zoomlion more manageable and incur fewer regulatory hurdles.
