Terex Corp. (TEX) announced that its German subsidiary, Terex Industrial Holding AG, has decided to make a voluntary cash public tender offer for Demag Cranes AG valuing the company at 883.9 million euros ($1.3 billion).
The offer price translates to 41.75 euros per share, which is at a 41% premium to the last undisturbed share price of 29.65 euros, prior to the speculation regarding a possible takeover interest in Demag, on October 6, 2010 and a 15% premium to the closing price on April 29, 2011 of 36.30 euros. The offer requires the acceptance of at least 51% of Demag Cranes shareholders.
Dusseldorf, Germany-based Demag is a leading provider of industrial cranes, crane components, harbor cranes and port automation technology. Terex is the second company to pursue Demag after Konecranes Oyi of Finland approached the company last year. However, Konecranes abandoned the plan in February following Demag’s refusal.
Terex will be financing the total consideration of 884 million euros from its existing cash and an already committed debt financing. The company’s liquidity as of March 31, 2011 totaled $1,219.0 million, which comprised cash balances of $723.7 million and borrowing availability under the company’s revolving credit facility of $495.3 million.
Demag’s business is complementary to the existing Terex business. With this combination, Terex will add a new product category of industrial cranes and hoists, and create the leading worldwide player in port equipment. The combined entity will have total revenues of about $5.8 billion in 2010 with a strong footprint in Europe and emerging markets, especially in China.
Germany is Terex’s second-largest market and production base. About 22% of Terex’s global headcount are located in Germany. Over the last ten years Terex has acquired four significant German businesses, one being Demag’s former sister company Demag Mobile Cranes in 2002.
Westport, Connecticut-based Terex Corporation is a global manufacturer of a broad range of equipment for the construction, infrastructure, quarrying, mining, shipping, transportation, refining, energy and utility industries.
The company’s manufacturing facilities are located in the U.S., Canada, Europe, Australia, Asia and South America. It operates through four business segments: Aerial Work Platforms, Construction, Cranes and Materials Processing. Terex competes with the likes of Caterpillar Inc. (CAT), Deere & Company (DE) and Komatsu Ltd. (KMTUY). We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.
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