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Terex buys Demag - "The big one"

Terex Corporation has entered into an agreement to acquire Demag Mobile Cranes GmbH & Co. KG from Siemens. The price is reported to be $150 million and brings to an end months of industry speculation about who would buy Demag.

Speaking to Fil Filipov described the purchase as "The big one" and predicted radical changes at Demag which would culminate in a "lean, mean machine". His comments were echoed by Ronald M DeFeo, Terex chairman and chief executive officer who said: "Demag provides substantial opportunities for synergies and cost savings".
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Fil Filipov

Demag issued a statement welcoming the deal and stressing that: "The change in ownership will not change the basic business strategy alignment of Demag Mobile Cranes". It added that: "Demag Mobile Cranes is to be integrated within the American Group as a company producing in Germany and will continue to operate as an independent legal entity with its own brand".

Ron DeFeo described the acquisition as "an excellent opportunity for us - from a strategic perspective, it improves our position in the all-terrain crane market, which has been a growing market category over the past several years, and gives us a product offering that fills gaps in the current Terex crane product line. When combined with our rough terrain and truck crane businesses, it will give us a product offering in the mobile telescopic crane market second to none.”

DeFeo continued, “Demag also has a leading market position in the 300-tonne to 1,600-tonne lattice-boom crane category, which complements our existing product offering nicely and enables us to offer our customers a full line of lattice boom cranes with lifting capacities from 60 tonnes to 1,600 tonnes. The combination of Demag and Terex will create a worldwide crane company with one of the broadest geographic and product offerings in the industry. We expect the acquisition to add $360 million in pro forma annual revenues and be accretive by $.20 to $.30 per share after planned cost reductions are implemented.”

Demag had total revenues of approximately $360 million in 2001. The transaction is subject to normal regulatory approval, but is expected to be completed at the end of the second quarter or early in the third quarter of 2002.

Bernd Düser of the Demag Mobile Cranes Executive Board commented: "With our product portfolio comprising crawler and all-terrain telescopic cranes, Terex has gained entry into a new market segment offering excellent prospects for the future". He added that: "The merger with Terex will give us a powerful boost, and here I am referring particularly to the improved opportunities now available to us on the US market".

“The Demag acquisition provides Terex with access to leading technology and high-end product lines,” commented Fil Filipov, Terex Executive Vice President, who will assume responsibility for the Terex crane business worldwide upon completion of the acquisition. “Demag is known in the market place for its product innovation, quality and excellent after sales service. Demag will provide Terex with an all-terrain product offering that will enable us to compete effectively in the European market place, which is the largest all-terrain market. It also positions us to compete in the growing North American all-terrain market, where we think there is a real opportunity to be aggressive and grow share by leveraging Terex’s strong market presence in mobile telescopic cranes in combination with Demag’s outstanding technology and customer care.”

Filipov noted: “The acquisition brings with it three production facilities, two in Zweibrucken, Germany and one in Pecs, Hungary, with over 460,000 square meters of production capacity. We have targeted $20 million in cost savings through the outsourcing of non-core activities, streamlining of the production process and improvements in purchasing. We will also be looking for ways to better leverage our German organization and take advantage of low cost production capabilities in Eastern Europe.”

The purchase completes one of the most dramatic periods of consolidation ever seen in the mobile crane industry. With Grove due to become part of Manitowoc in the next few weeks, the Terex purchase of Demag creates a second US controlled "mega" crane manufacturer both of which will be in head-on competition with Liebherr and, to a lesser extent, Tadano Faun.