Konecranes Soars After Deal to Buy $1.3 Billion Terex Unit

  • Stock gains 20 percent; Terex shares advance in U.S. trading
  • China’s Zoomlion interested in buying rest of Terex business

Konecranes Oyj shares soared after the crane maker agreed to buy a lifting-gear business from Terex Corp. for about $1.3 billion, abandoning a full merger plan and paving the way for China’s Zoomlion Heavy Industry Science & Technology Co. to buy the rest of the U.S. company.

Konecranes will pay $820 million in cash and 19.6 million shares for Terex’s material-handling and ports-solutions division, MHPS. It’s targeting savings of 140 million euros ($158 million) from a three-year integration program, the Hyvinkaa, Finland-based company said in a statement on Monday.

The Finnish crane maker’s shares gained 18 percent to 24.28 euros in Helsinki, their biggest one-day jump since October 2008. Terex rose 10 percent to $24.94 in New York, its biggest increase since January.

The decision to buy only part of Terex marks the end of a proposed full merger with Konecranes that had been in the works since August 2015. That deal was thrown in doubt when China’s Zoomlion unexpectedly emerged as a rival suitor for Terex in January. The bidding war escalated in March, when Terex said it will hold talks with the Chinese industrial machinery manufacturer after receiving an increased offer.

The proposed acquisition is a “dream solution” if it goes through, Kepler Cheuvreux analyst Johan Eliason said in a note. “However, Zoomlion can still come back so the final outcome is not certain yet.”

‘Perfect Match’

The businesses are a “perfect match,” Panu Routila, chief executive officer of Konecranes, said on a conference call with media and analysts. “With Terex MHPS, we will achieve growth opportunities, especially in the service business.”

Terex will continue to pursue discussions with Zoomlion, it said.

Zoomlion is interested in buying the rest of Westport, Connecticut-based Terex, which includes construction equipment and rock-crushing machines, and that transaction could face less risk of being rejected by U.S. officials if it excludes the MHPS division, according to people familiar with the situation. The Chinese company would also have the option of still pursuing a full takeover of Terex, which could leave the Finnish firm empty-handed except for a $37 million breakup fee.

Construction Equipment

A smaller deal would also make it easier for Zoomlion to gain approval from the Chinese currency regulator to move the acquisition funds offshore, according to one of the people, who asked not to be identified as the information is private. China’s State Administration of Foreign Exchange, which monitors fund outflows, is concerned that some outbound deals could further the risk of yuan depreciation, the person said.

A spokeswoman for Zoomlion declined to comment. SAFE didn’t immediately reply to faxed questions.

Konecranes was advised by Perella Weinberg Partners and Terex is working with
Credit Suisse Group AG.

The original Konecranes-Terex combination, which had an announced value of $4.2 billion, according to data compiled by Bloomberg, was intended to counter a slowdown in demand for lifting gear and heightened competition from Chinese manufacturers by boosting global reach and cutting costs.

If the merger had been carried out as intended, it would have added construction and material processing equipment to Konecranes’ product portfolio. “Now, we are creating a truly focused but global industrial lifting and port solutions company,” Routila said. “Having considered all the options, both Terex and Konecranes have decided that what we present today is the best solution.”

Zoomlion, which would gain Terex technology and international presence, raised its cash offer for the entire company to $31 a share in March, a dollar higher than its unsolicited January bid. Terex would likely seek guarantees to address regulatory and completion risks in any agreement.

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