29.10.2014

Terex forms JV with Manitex

Terex is to sell 51 percent of its ASV business to crane and port equipment manufacturer Manitex in order to form a joint venture to build and market ASV compact track loaders and skid steers. Terex will retain the 49 percent minority stake.

The deal is expected to raise over $125 million for Terex, including cash from a recapitalisation of ASV prior to closing and a significant amount in tax benefits. ASV will continue to sell its compact track loaders and skid steers under the Terex brand.

The transaction includes ASV’s Grand Rapids, Minnesota, manufacturing facility and certain assets held at Terex’s Southaven, Missouri, distribution centre which is expected to be close before the end of the year.

Terex will use a portion of the cash it receives from the ASV sale to acquire $12.5 million of newly issued Manitex equity, and $7.5 million of convertible debt securities. Terex acquired ASV in 2008 for around $488 million - see: Terex buys ASV.

Terex chief executive Ron DeFeo said: “The formation of this joint venture is a positive for both Terex and ASV. Terex preserves its broad compact equipment product offering and its participation in an expected housing recovery. Manitex will augment ASV’s existing distribution channels, allowing for faster growth of the ASV business.”

“We have sold businesses to Manitex and profitably owned their equity in the past. They are a good aggregator and operator of machinery businesses, and we look forward to extending our value creating relationship.”

Vertikal Comment

This is an interesting move on both companies parts, for Terex it offloads a challenging part of its Construction division that is possibly too small for it to devote a large amount of senior management time to - without losing access to the products. At the same time this is a relatively large business for Manitex, which has been honing its skills of developing strong businesses out of struggling or niche ones.

The deal structure - a JV and equity injection - makes the acquisition possible and feasible for Manitex. It could work out really well.