Terex asks Zoomlion to improve its $3.3 billion offer
U.S. crane maker Terex Corp has told Chinese peer Zoomlion to sweeten its $3.3 billion offer in order for it to abandon its merger agreement with Finland’s Konecranes, according to people familiar with the matter.
Terex’s response shows that Zoomlion has made little progress toward a deal since its offer was disclosed publicly by Terex a month ago. Terex said on Feb. 17 that it was continuing to review Zoomlion’s proposal to determine the course of action that is in the best interest of its shareholders, and that this process would take time.
The latest development also illustrates that Zoomlion’s main stumbling block in its negotiations with Terex is price, rather than concerns that the United States could block the deal because of Terex’s ties to the U.S. military and presence in U.S. ports.
Terex has argued privately that the synergies with Konecranes in the material handling and port systems businesses of the two companies mean that Terex is worth more than the $30 per share in cash that Zoomlion has offered, the people said on Wednesday.
Terex has not communicated to Zoomlion the exact price it would need to justify breaking up its merger agreement with Konecranes, though discussions are continuing, the people said. Zoomlion has not shown any willingness so far to raise its offer, the people added.
The sources asked not to be identified because the discussions are confidential. Terex and Zoomlion declined to comment, while a Konecranes representative did not immediately respond to a request for comment.
The battle for Terex comes as the market for cranes continues to struggle with weak demand, driven by low oil and gas prices and foreign exchange volatility.
Terex reported 2015 fourth-quarter income from continuing operations of $14.6 million on net sales of $1.6 billion, versus income from continuing operations of $79.9 million on net sales of $1.8 billion in the fourth quarter of 2014.
Konecranes has offered 0.8 if its shares for each Terex share. It has argued that the two companies can face the downturn in their cyclical industry more effectively if they join forces, and that the shareholders of the combined companies will reap substantial profits in an upturn.
Westport, Connecticut-based Terex has 97 so-called priority-rated contracts with the U.S. government that could attract scrutiny from the Committee on Foreign Investment in the United States (CFIUS). It also provides mobile harbor cranes in ports that are seen as a critical part of U.S. infrastructure.
Last week, Representative Duncan Hunter, a member of the House Committee on Armed Services, raised concerns about a possible Zoomlion-Terex deal in a letter to U.S. Treasury Secretary Jack Lew, citing the Chinese company’s longtime association with China’s People’s Liberation Army.
However, Terex it is not treating CFIUS as an issue that would preclude any deal with Zoomlion. The value of Terex’s priority-rated government contracts is very small and not material to Terex’s business, Reuters reported last month.
The company’s ports business in North America is also small, with its biggest contract being a $75 million order for automated equipment at the Long Beach port in California.
