16.05.2011

Terex will not enter a bidding war

Ron Defeo of Terex has said that the company’s offer for Demag Cranes is full and fair and that it will not be drawn into a bidding war for the German overhead and port crane group.

With Demag shares running at a premium of over €6 a share compared to the Terex offer of €41.7 a share, it is clear that a higher bid is expected.

"There is an expectation that maybe there will be alternate bidders, we don't see it that way." Said Defeo, speaking at an investor conference. “All bidders in my opinion have an issue or two, whether that’s regulator risk or cultural issues. Each one of the competitors has significant overlaps where we don’t. Overlaps mean either jobs get lost or regulator risk.”

Defeo also added that the Demag management has not responded to the Terex offer. The offer period for Demag shareholders will begin before the end of the month, following approval by German regulators said Defeo.

Vertikal Comment

This potential acquisition is moving towards an interesting stage, Demag – with the support of its largest shareholder – has dismissed the Terex approach as derisory and said that it will not respond until it sees the final offer to shareholders. Terex is meanwhile taking its time to prepare its formal offer which it will send to Demag shareholders directly.

Terex appears to be positioning its offer as a 'take-it or leave-it' deal and looks as though it is aiming to sit tight on its current offer of the best part of €42 a share. The big question is how will the rest of Demag’s shareholders react?

Defeo is no beginner when it comes to company takeovers, he must have strong intelligence that suggests that a majority of shareholders are likely to bail out close to the offer price, even though some clearly think that Terex can be pushed close to €50 a share. It is more likely though the deal will either succeed at around €45 – in spite of Defeo’s protestations that €41.70 is enough – or fail and Demag will continue on its independent way.

My money is on a deal going ahead, but only after it has been ‘sweetened’ slightly – watch this space.