11.08.2015

Terex and Konecranes to merge

Terex has announced a planned merger with Finnish port and industrial lifting company Konecranes in an all share deal, creating a combined business with revenues in the region of $10 billion.

Terex shareholders will own approximately 60 percent of the combined company, while Konecranes shareholders will have 40 percent. The new company will be named Konecranes Terex Plc and will be incorporated in Finland.Once the deal is completed the new company plans to authorise a $1.5 billion share repurchase programme.

The chief executive of the combined group will be Ron Defeo of Terex, while Stig Gustavson of Konecranes will be chairman. The company will have “significant headquarters” in Westport, Connecticut and Hyvinkää, Finland, and will be listed on the Nasdaq Helsinki exchange and the New York Stock Exchange. The deal, if approved, is expected to close in the first quarter of 2016.

The two companies say that the combination will offer “Increased global scale with enhanced competitiveness to rival low-cost emerging market player, with:
-Broader presence in key sectors with greater opportunity to capitalise on growth trends in the port and industrial sectors as well as services.
-A more robust portfolio of complementary products and customer solutions.
-Critical scale for further technology development and enhanced R&D.
-Significant operational and corporate synergies and complimentary geographic profiles, and:-
-Strong balance sheet and cash flow generation to support growth and return of capital to shareholders.”

Ron DeFeo said: “This merger brings together two great businesses and through synergies provides another lever that is within our control to deliver value-creation to both the shareholders of Terex and Konecranes. We have a deep respect for Konecranes and look forward to joining forces with them to build a stronger and more diverse company that will be in an excellent position to succeed in a dynamic and highly competitive global industry.”

Stig Gustavson added: "The combination of Konecranes and Terex is a defining step in the history of both companies. With a focus on Lifting and Material Handling solutions, Konecranes Terex will be in an excellent position to deliver enhanced growth in revenue and margins through several strategic advantages, including significant cross-selling opportunities. There is a common culture between the two organizations, with both companies having long histories of designing competitive and innovative solutions. Together, we will have the opportunity to expand what Konecranes and Terex have built and become even stronger in the future."

Vertikal Comment

While rumours have circulated for some time regarding the possible disposal of one or more parts of Terex, we did not see this one coming.

It reinforces Terex as a lifting and material handling company and could possibly accelerate the eventual disposal of Terex Construction, which will represent just eight percent of revenues in the combined business.

The deal will bring a better balance to the geographic spread of the two companies, while creating an impressive service operation and a dominant player in the port and material handling industries. One of these might just cause approval issues.

All in all this looks like a good move for both companies and achieves Ron Defeo’s long term aim to create a $10 billion revenue group.