Terex (TEX.N)—a U.S. cranes and mining equipment maker—and Finland’s Konercranes (KCR1V.HE) have agreed to an all-share merger. With this merger, both the companies hope to earn combined annual revenue of $10 billion. This revenue will, further, help them to cope with the rising demands of the Chinese and European markets.
This deal will leave Terex shareholders with 60 percent of the stock in the new company namely, Konecranes Terex PLC. This company is planned to be incorporated in Finland, home of Konercranes, but it will also have offices in Westport, Conn., where Terex headquarter is based.
“We’ve been building towards this day,” said Terex Chief Executive Ron DeFeo during a conference call. “It’s a day that has come after years of hard work and focus on changing Terex to create a worldwide company with scale and reach.”
The merger “is an attractive diversification for growing Terex’s exposure to the less cyclical side of its business,” said Joe O’Dea, an analyst for Vertical Research Partners.
Konecranes Terex PLC, the new company, will have leading shares in both the global industrial crane market and the port crane market. Both are slow-growing market with annual global sales expanding from 2 to 4 percent. Further, it is expected to generate approximately $10.6 billion sales with $1.1 billion operating profit. The merger is expected to ensure cost savings of about $119 million per year.
Terex investors are going to receive eight-tenths of a share of Konecranes stock for each of their Terex shares. In future, we wish to see such high-ticket mergers that can strengthen the sector financially.
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