One of the largest mergers in the world of construction equipment has been put on hold. U.S.-based Terex Corp says it is halting all merger activities with Finnish-based Konecranes while it considers an acquisition offer from China-based Zoomlion.
In a statement to the Reuters news agency, Terex said "given the uncertainties involved with the merger and proposed acquisition (by Zoomlion), the decision was made to halt information sharing, work on integration, and synergies between the businesses, until further clarity can be had on the course of action.”
While the integration work might be on pause, the regulatory filings and associated paperwork continues apace, according to Thomas Gelson, Terex vice president for media relations.
“The Terex board of directors has not changed its recommendation on the proposed combination with Konecranes,” Gelson told ENR. “Work continues on the required antitrust filings with the US and EU and other countries and work continues on the SEC and Finnish filings.”
The move came after a Feb. 17 letter from Zoomlion outlined the firms intentions to buy Terex for $30 per share, well above its current trading price. Zoomlion originally made its offer to Terex in December, but offered few details on how it planned to finance the acquisition. The acquisition would be financed through 40% cash on hand and 60% loans from Chinese banks.
The acquisition of a major U.S. equipment manufacturer may face some regulatory difficulties and political opposition. In a letter to Treasury Sec. Jacob Lew on Feb. 17 regarding the possible acquisition of Terex by Zoomlion, Rep. Duncan Hunter (R-Calif.) said “I have a great deal of concern about the implications this possible takeover could have on national security.” Hunter cites Terex’s existing government contracts with the Dept. of Defense and the Dept. of Homeland Security as reasons for concern. "While it is my understanding that Terex and Zoomlion have yet to finalize the terms of a deal, the fact that a leading PLA (People's Liberation Army) supplier is seeking to purchase an American company that provides critical infrastructure to a number of government agencies … demands that the agreement undergo thorough scrutiny if it does materialize."
Terex stocks rose following the Zoomlion letter and the reports that the merger with Konecranes was being put on pause, a welcome boost for a company coming off a rough year. The Zoomlion letter came the same day that Terex announced some disappointing Q4 2015 results, which included an 11.8% year-over-year decline in sales, 6.2% of which Terex attributes to unfavorable exchange rates for its global business. Terex’s overall sales for 2015 were about 10.5% below 2014. In the construction sector, Terex noted softer-than-expected demand for cranes and aerial work platforms in North America, but saw some growth in the region’s concrete business.