Offer for US crane maker confirmed
China's Zoomlion Heavy Industry Science and Technology Co Ltd confirmed on Wednesday that it has made an offer valued at about $3 billion for US crane company Terex Corp.
Zoomlion said that it would pay $30 a share for Terex, which is based in Westport, Connecticut. In 2015 Terex agreed to merge with Finland-based equipment manufacturer Konecranes Oyj in a stock swap that also valued each Terex share at about $30. The companies described the transaction as a merger of equals. A combined Terex and Konecranes would produce about $10 billion in annual sales.
Founded in 1992, Zoomlion manufactures high-tech equipment for the agricultural, building, energy, environmental, and transport-engineering sectors. It has manufacturing facilities in Brazil, Germany, India and Italy.
Joel Tiss, an analyst with BMO Capital Markets, said Terex will likely continue to pursue the Kone union while assessing the value creation and feasibility of the Zoomlion offer. "Which offer is better depends on your time horizon. ($30 a share) immediately (is perhaps) better than trying to wait longer for a higher pay off down the road. But (it's) a hard call because both Terex and Kone businesses are depressed," he said.
In a statement, Terex said it has " entered into a non-disclosure agreement with Zoomlion. Consistent with our fiduciary duties, the Terex management and Board of Directors, working with our legal and financial advisors, is in discussions with Zoomlion to determine the course of action that it is in the best interests of our shareholders. The Zoomlion proposal is conditioned on, among other things, receipt of US and Chinese regulatory approval and Zoomlion shareholder approval," said Terex.
In January, citing sources, Reuters reported that the deal could be blocked by a review from the Committee on Foreign Investment in the United States (CFIUS). It has jurisdiction to examine an acquisition of a US business that will result in foreign control. CFIUS is only interested when the transaction raises national security or critical infrastructure concerns.
Reuters reported that Terex has 97 so-called priority-rated contracts with the US government that could attract CFIUS scrutiny. It also provides mobile harbor cranes in ports that are seen as a critical part of US infrastructure.
"I personally don't think that any of Terex businesses are strategic for US security concerns. If there is some political pressure to void any Chinese takeovers - that is different, but otherwise there should be no big issues," said Tiss.
Zoomlion said on Wednesday it was confident its deal for Terex would win US regulatory approval, according to Reuters.
Reuters also reported that US Representative Duncan Hunter raised concerns about the deal in a letter to Treasury Secretary Jacob Lew, who chairs CFIUS.
On Tuesday, Fairchild Semiconductor International Inc said it had rejected an unsolicited acquisition offer from China Resources Microelectronics Ltd and Hua Capital Management Co Ltd, citing concerns over the US approval process.
Fairchild had agreed to sell itself in November to US peer ON Semiconductor for $2.4 billion. China Resources Microelectronics and Hua Capital had offered $2.46 billion for Fairchild in December.
Fairchild said in an SEC filing that there was an "unacceptable level of risk" that the deal with the Chinese would be rejected by CFIUS.
paulwelitzkin@chinadailyusa.com
