The Boards of Directors of Konecranes Plc and Terex have approved an agreement to combine their businesses in a merger of equals. The combined company, to be called Konecranes Terex Plc, will be a leading global Lifting and Material Handling Solutions Company with estimated combined 2014 revenues and EBITDA of €7.5 ($10.0 billion) and €636 ($845 million).
The combination will bring together leading companies in lifting, materials handling, and equipment servicing solutions. Konecranes Terex will be parent to a family of leading brands with global leadership positions in the industrial lifting, port solutions, aerial work platforms, materials processing and cranes categories. The combined company says it will be able to offer comprehensive solutions to customers worldwide based on a highly complementary product portfolio.
Konecranes Terex believes it will have the critical scale to continue to drive technology innovation and provide customers with an industry-leading service. The combined company is expected to create enhanced shareholder value through:
Stig Gustavson, chairman of the board of Konecranes, said: “The combination of Konecranes and Terex is a defining step in the history of both companies. With a focus on Lifting and Material Handling solutions, Konecranes Terex will be in an excellent position to deliver enhanced growth in revenues and margins through several strategic advantages, including significant cross-selling opportunities. There is a common culture between the two organisations, with both companies having long histories of designing competitive and innovative solutions. Together, we will have the opportunity to expand what Konecranes and Terex have built and become even stronger in the future.”
Terex CEO, Ron DeFeo, said, “This merger brings together two great businesses and through synergies provides another lever that is within our control to deliver value-creation to both the shareholders of Terex and Konecranes. We have a deep respect for Konecranes and look forward to joining forces with them to build a stronger and more diverse company that will be in an excellent position to succeed in a dynamic and highly competitive global industry.”
Terex shareholders will own approximately 60% and Konecranes shareholders will own approximately 40% of the combined company. The agreed exchange ratio is consistent with the average share-price implied exchange ratios over the past three and six months of 0.7921 and 0.7933 respectively.
The combined company is will be listed on Nasdaq Helsinki and New York Stock Exchange. The transaction is expected to be accretive to both companies’ shareholders in the first full year after closing.
The parties expect that in the mid-term, Konecranes Terex will increase profitability based on market growth, internal profitability initiatives already implemented and synergies resulting from the merger. Based on Konecranes’ and Terex’ internal mid-term outlooks the parties would seek to achieve revenue growth of more than 10% and operating profit increase of significantly more than 50% within three to four years from closing compared to 2014.
The combined company expects save €110 ($121) million in annual pre-tax cost synergies from procurement savings, optimisation of operations as well as selling, general and administrative efficiencies. In addition, Konecranes Terex anticipates a post-tax income enhancement from financing, cash management and structure optimisation of at least €32 ($35) million annually. In total, these synergies are expected to result in €109 ($119) million of annual net income benefits 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 €1.4 ($1.5) billion, split between €456 ($500) million as soon as possible after closing and up to an additional €0.9 ($1) billion executed within 24 months after closing
Upon closing of the transaction, the combined company is planned to have a board of directors comprising nine members, of which five directors will be nominated by Terex and four directors by Konecranes. Konecranes’ current chairman of the board will become Konecranes Terex’ chairman and the Terex CEO will become Konecranes Terex’ CEO. Should Terex determine to appoint a new CEO before the completion of the transaction, the parties have agreed to do this in close collaboration between the boards of directors of Terex and Konecranes.
The combined company will maintain headquarters in Hyvinkää, Finland as well as Westport, Connecticut, USA. Following closing of the transaction, the combined entity is expected to have approximately 32,000 employees worldwide.
The transaction is subject to approval by both Terex and Konecranes shareholders. Konecranes and Terex expect to convene general meetings of their shareholders to approve the transaction in early 2016. Closing of the transaction is expected to occur during the first half of 2016.
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