01.11.2010

Terex sues Bucyrus

Terex has accused Bucyrus International of abusing a post-closing adjustment agreement in a bid to reduce the $1.3 billion price it paid for Terex’s mining business by $152 million – almost 12 percent.
Bucyrus won the closed auction to acquire the Terex Mining business in December last year, with completion in February, for $1 billion in cash plus 5.8 million shares.
At the time of signing the deal, the two companies agreed that any changes in the net capital of the mining business during the two months between the signing and completion would be made up via post-closing adjustments, but only if the variation exceeded $15 million.
On closing the variation was $10 million, so according to the contract no additional funds needed to change hands.
However according to papers filed by Terex, Bucyrus has taken a ‘fresh look at historic accounting decisions, policies and judgments’ in order to try and reduce the price it agreed. In spite of reporting that the acquired business has met and exceeded its expectations in recent quarterly accounts.
As a result Terex has summonsed Bucyrus in the New York State Supreme Court, New York County (Manhattan).
The Summons accuses Bucyrus of breaching the contract and of “cynically distorting the post-closing adjustment provisions to try to obtain a massive windfall in an improper attempt to retrade the transaction after-the-fact. “
Terex also claims that Bucyrus and its advisers purposely held back information it now claims to have found until after it won the bid for the business – with the specific intent to renegotiate the price after it took control.
Terex is looking for the court to force Bucyrus to honour its contractual obligations and to hand over the divisions books and accounting records that it claims demonstrates its revaluation claims – something that Bucyrus has so far refused to do. Or to pay it unspecified damages for breach of contract.