Konecranes and Terex Corp will merge to form a "leading global lifting and material handling and solutions company through an all-stock merger of equals" according to leading industry journal WorldCargo News.
The merger is described as a "combination of highly complementary businesses, creating a leading global lifting and material handling solutions company with a well-balanced business and geographic profile with €7.5B/US$10B in combined 2014 revenue."
The combined company, to be called Konecranes Terex Plc, "will have critical scale to deliver outstanding technology innovation and enhanced service to customers."
Terex shareholders will receive 0.80 Konecranes' shares for each existing Terex share, which is consistent with the average share-price implied exchange ratios over the past three and six months of 0.7921 and 0.7933, respectively at closing, expected during the first half of 2016. The combined company will be owned approximately 60% by Terex' shareholders, and 40% by Konecranes' shareholders; the transaction is expected to be accretive to the shareholders of both companies in the first full year after closing; identified annual operational synergies of at least €110M/$121M EBIT contribution and additional €32M/$35M post-tax income benefit from financing, cash management and structure optimisation, anticipated to be fully implemented within three years from closing.
It is the joint intention of Konecranes and Terex to execute a share buy-back programme post-closing of up to €1.4B/$1.5B, split between ca. €456M/$500M as soon as possible after closing and up to an additional €0.9B/$1B executed within 24 months after closing. The "enhanced capital structure and strong free cash flow is expected to support growth with increased returns to shareholders, including maintenance of Konecranes dividend level."
Konecranes Terex will be incorporated in Finland, with headquarters in Hyvinkää, Finland and Westport, Connecticut, USA. Konecranes’ current Chairman of the Board (Stig Gustavson) will become Konecranes Terex’ Chairman and the Terex CEO (Ron DeFeo) will become Konecranes Terex’ CEO. The nine-member Board will include five directors to be nominated by Terex and four directors to be nominated by Konecranes.
As a first internal consequence of this merger, Nina Kopola has announced her resignation from the Board of Directors of Konecranes. Ms. Kopola is resigning from the Board due to possible conflicts of interest that could arise from her position as the Board member of Metso Corporation, which competes with Terex in materials handling sectors.
Advantages of the merger highlighted by the companies include:
Increased global scale with enhanced ability to remain competitive via-a-vis intensifying global, in particularly low-cost emerging market competition
Broader presence in key sectors with greater opportunity to capitalize on growth trends, especially in industrial lifting and port solutions
Creation of a global service organization of critical mass and scope
The stock market announcement about a "combination of highly complementary businesses" might raise an eyebrow or two in the port handling equipment sector, as Konecranes competes with Terex Corp affiliate Terex Port Solutions in almost all major lifting sectors - STS cranes, RTGs/RMGs, straddle carriers, reach stackers, ECHs and heavy FLTs.
Exactly how product manufacturing, consolidation, rationalisation, branding, etc will pan out remains to be seen, but this looks like another clear narrowing of choice for customers.
The merger is subject to approval by both Konecranes and Terex shareholders, as well as receipt of regulatory approvals in the relevant jurisdictions.
The FT has also described the deal as being a tax inversion deal for Terex http://www.ft.com/cms/s/0/30bba8ec-4025-11e5-9abe-5b335da3a90e.html#axzz3ilu7HMrt