The US’s Terex Corporation and Finland’s Konecranes have agreed to merge into a combined company with 32,000 people, and a project annual revenue of $10.6bn within three to four years.
The combined ‘Konecranes Terex’ will have a presence across construction, mining, manufacturing and shipping, and the merger is expected to result in roughly $120m of annual cost savings across both companies.
The deal will see Terex investors receive 0.80 shares in Konecranes for each of their Terex shares, valuing the combined company at $2.5bn and represented a 7.7% premium on Terex’s closing price on Friday.
After the transaction, which the companies called a merger of equals, Terex shareholders will own about 60% of the combined company, while Konecranes shareholders will own the remaining 40%.
“The combination of Konecranes and Terex is a defining step in the history of both companies,” Stig Gustavson, Konecranes chairman, said in a statement.
Terex CEO Ron DeFeo, meanwhile noted that the deal “provides another lever to deliver value-creation to both the shareholders of Terex and Konecranes”.
The deal appears to be somewhat of a coup for Konecranes, which posted sales of $2.24bn in 2014, and a workforce of 12,000 people, while Terex posted $7.3bn, and a workforce of 20,400 people.
However, while Terex has been expanding its presence into factory crane market in recent years, acquiring Demag Cranes for $1.36bn in 2011, the firm has struggled to deliver consistently high sales and profit since 2008 as a result of volatility in the demand for its construction cranes and work lifts.
The combined company will generate about 45% of its annual revenue from industrial and port cranes, up from 24% for Terex alone in 2014.
Konecranes will meanwhile reduce Terex’s reliance on its work platform business – which accounted for more than one-third of Terex’s sales in 2014 and more than half its operating income – to make up just 23% of revenue and about 40% of income.
Construction cranes will then account for 18% of Konecranes Terex’s revenue, after making up 24% of Terex’s sales last year.
The transaction is expected to close in the first half of 2016.
This in place, Konecranes Terex expects to buy back up to $1.56bn in shares over the next two years.
Now, a search is under way for a chief executive after Konecranes CEO Pekka Lundmark announced plans to depart in September, while DeFeo, who has led Terex for 20 years, has already indicated his own plans to depart when his contract expires at the end of the year.
On Tuesday, Terex shares closed up 22.6% at $26.78, while Konecranes rose 23.4% to $38.54 in early trading in Helsinki.
The combined company will list its shares on both the Nasdaq in Helsinki and on the New York Stock Exchange, basing itself in Hyvinkaa, Finland, while retaining Terex’s base in Westport, Connecticut.
