Terex Corp. (TEX) has launched a tender offer for Demag Cranes AG at 41.75 euros per share, coming to a total bid of 883.9 million euros ($1.3 billion), under which Demag Cranes shareholders would have time until June 30 to accept the offer. The minimum acceptance threshold for Demag's tender offer is 51%.
Terex’s offer price of 41.75 euros per share previously announced on May 2, 2011, is at a 41% premium to the last undisturbed share price of 29.65 euros, prior to the speculation regarding a possible takeover by a previous bidder, Konecranes Oyi, of Finland, on October 6, 2010. The price is also at a 15% premium to the closing price on April 29, 2011 of 36.30 euros.
Terex has received term loan commitments of $1.1 billion and multi-currency revolving lines of credit to fund the takeover. The proceeds of the term loans are to be used to allow Terex Industrial to pay for the shares of Demag and meet all fees and expenses incurred in connection with the transaction. The agreement also provides for incremental loan amounts of up to $750 million, which can be in the form of revolving credit loans, term loans, or a combination of both, provided that no more than $100 million of the incremental amount may be used for incremental term loan commitments.
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. Terex’s debt-to-capitalization ratio improved to 40% as of March 31, 2011, from 45% as of December 31, 2010.
Demag’s business complements the existing operations of Terex. With this combination, if approved, Terex will add a new product category of industrial cranes and hoists, and become the leading worldwide player in port equipment. The combined entity will have a strong footprint in Europe and emerging markets, especially in China.
In this context, 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). The shares of Terex currently retain a Zacks #3 Rank (short-term Hold recommendation).
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