Terex Corp’s (TEX) offer for Demag Cranes AG at 883.9 million euros ($1.3 billion), or 41.75 euros per share, has been rejected by the latter on grounds of the offer being too low accompanied with a lack of transparency by Terex as to its future plans for Demag.
This echoes the concerns of Demag’s biggest shareholder, Cevian, voiced earlier labeling the deal as grossly inadequate. Cevian had cited that ever since the bid was announced on May 2, 2011, Demag shares have traded above the bid per share of 41.75 euros.
Demag recently raised its guidance for the fiscal year ending September 30. The company now envisions sales of around 1.06 billion euros in fiscal 2011, up from a previous forecast of 1.02 billion euros to 1.05 billion euros. It also estimates its margin on earnings before interest and taxes at around 6.4%, near the upper end of a previous projection of 6.1% to 6.5%.
The crane maker maintains that Terex failed to take into account the sales and profit expansion that Demag expects by the middle of the decade. The company predicted its annual revenue will reach 1.7 billion euros in fiscal year 2014-15, an 83% increase from 2010 levels. Meanwhile, the company sees operating income quadrupling to about 225 million euros by 2014-15. Demag however added that it is open to further discussion.
In a quick recap, Terex had earlier taken the offer to Demag’s shareholders who were given time until June 30 to accept the offer. The minimum acceptance threshold for Demag's tender offer stood at 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.
Demag’s business complements the existing operations of Terex. Despite the refusal, if Terex successfully pursues the acquisition, the company 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. Demag is counting on capturing rising demand for cranes in developing countries like China, the world's largest market for industrial cranes. On these lines, Demag announced acquiring a minority stake in China's largest industrial crane maker Weihua, in January this year, with the intent of gaining control of the company in the months ahead.
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).
CATERPILLAR INC (CAT): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
Be the first to comment