Terex’s Chinese Suitor Talks End, Konecranes Deal Proceeds

U.S. crane-maker Terex Corp.’s talks with a Chinese suitor broke down after disagreement on terms, clearing the way for its planned $1.3 billion sale of a ports lifting-gear business to competitor Konecranes Oyj.

Zoomlion Heavy Industry Science and Technology Co. decided it wouldn’t be able to agree on a price for Terex’s business once the lifting-gear unit was excluded, the Chinese company said in a statement Friday.

After Terex agreed to sell the lifting-gear business to Konecranes earlier this month, the Westport, Connecticut-based company indicated it wanted an offer of $31 per share or higher, Tom Gelston, Terex’s vice president of investor relations said in e-mailed comments.

The deal also stumbled due to uncertainty about whether China’s State Administration of Foreign Exchange would approve the transaction, Gelston said.

Zoomlion believed the Chinese regulators were fully supportive of the proposed transaction, and was confident it could secure financing for the deal, according to a person familiar with the negotiations, who asked not to be identified as the discussions were private.

Terex’s expectations on the value didn’t reflect the impact of the sale of the lifting unit, according to Zoomlion’s statement.

‘Dream Solution’

Zoomlion’s loss is Konecranes’ gain. Terex had initially agreed last year to merge with its Finnish rival, only to see the deal unravel with the unexpected entrance of Zoomlion. After abandoning the August 2015 plan to combine, Konecranes earlier this month negotiated the purchase of Terex’s material handling and ports solution segment, a deal that Kepler Cheuvreux analyst Johan Eliason described at the time as the “dream solution.”

“We will achieve critical scale,” Konecranes Chief Executive Officer Panu Routila said in a statement Friday. “Of central importance is the fact that with MHPS we will have additional installed base for cranes.”

Konecranes gained 3.3 percent and closed at 24.07 euros in Helsinki. Zoomlion shares closed 1.6 percent lower at 2.46 Hong Kong dollars. Terex plunged 14 percent to close at $20.89 in New York.

Deal Intact

The Finnish company said in today’s statement that its deal will go ahead as planned, and the terms remain unchanged. The agreement with Konecranes could be terminated by Terex prior to May 31 if it enters into, or believes it will enter into, a legally binding merger with Zoomlion. In such a scenario, it would pay Konecranes a termination fee of $37 million.

Zoomlion was interested in purchasing the rest of Terex that Konecranes didn’t agree to buy, including construction equipment and rock-crushing machines, people familiar with the situation said earlier. The Chinese company -- China’s second-biggest maker of construction equipment by revenue, trailing Sany Heavy Industry Co. -- would also have had the option of still pursuing a full takeover.

Chinese companies are aggressively expanding overseas as growth slows at home and the government encourages some firms to go abroad. Amid overcapacity and slowing demand in the world’s second-biggest economy, Zoomlion’s profit last year plunged 85 percent to 89 million yuan ($14 million). China accounted for 88 percent of the company’s revenues last year, compared with 93 percent in 2013, according to Bloomberg-compiled data.

--With assistance from Brendan Case and Richard Clough To contact the reporters on this story: Niclas Rolander in Stockholm at nrolander@bloomberg.net, Anand Krishnamoorthy in Singapore at anandk@bloomberg.net, Ed Hammond in New York at ehammond12@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Elizabeth Fournier, Brendan Case