The acquisition of Material Handling & Port Solutions (MHPS) will improve Konecranes’ position as a focused global leader in the Industrial Lifting & Port Solutions market. Konecranes will achieve substantial growth opportunities in the service business as well as critical scale for further technological development. Konecranes’ recent investments in business infrastructure and global footprint optimization will provide significant earnings leverage. Based on 2015 financials, Konecranes and MHPS had aggregated sales of EUR 3,517 million, adjusted EBITDA of EUR 267 million (excluding synergies) and a total workforce of approximately 19,000.
The Stock and Asset Purchase Agreement may be terminated by Terex prior to May 31, 2016, if it enters into, or reasonably believes that it will promptly enter into a legally binding merger agreement with Zoomlion Heavy Industries Science & Technology Co., Ltd., in which case, it will compensate Konecranes with a termination fee of USD 37 million.
Transaction terms
The Acquisition, valued at EUR 1,126 million enterprise value based on Konecranes closing price of EUR 20.60 as of May 13, 2016 on a cash and debt free basis, will bring together a range of leading brands and offer significant industrial and operational synergies targeted at EUR 140 million p.a. at EBIT level within three years from closing. Terex will receive USD 820 million (EUR 723 million) in cash and 19.6 million newly issued Konecranes class B shares, making Terex a 25% shareholder (calculated from shares outstanding on April 30, 2016). The class B Shares to be issued to Terex will be created through an amendment to Konecranes’ Articles of Association and will have the same financial rights as Konecranes ordinary shares but are subject to voting and transfer restrictions as well as differing Board nomination rights described in more detail below and in Appendix 1. The purchase price is subject to post completion adjustments based upon the level of net working capital and cash and debt in the acquired business at the closing date. In addition, the number of shares to be issued may be adjusted depending on the performance of the MHPS business in 2016. Also, certain purchase price adjustments may occur based on possible outcomes related to antitrust rulings.
The agreed purchase price represents a multiple of 10.5x enterprise value / 2015 adjusted EBITDA used for valuation purposes, and of 5.3x including run-rate synergies (enterprise value adjusted for EUR 190 million expected implementation costs and capex). With the transaction, Konecranes assumes certain unfunded pension liabilities.
As part of the transaction, Konecranes’ articles of association will be amended to create the new class of B shares and Terex and Konecranes will enter into a shareholder’s agreement (“SHA”). Pursuant to the SHA and changed articles of association, Terex will be entitled to nominate up to two members to the Board of Directors of Konecranes as long as Terex’s or its group companies’ shareholding in Konecranes exceeds certain agreed thresholds. Terex’s initial Board nominees will be David Sachs and Oren Shaffer as of closing of the Acquisition. Terex will also be subject to certain standstill obligations for a four-year period, as well as more limited standstill obligations following the initial four-year period, and a non-compete obligation with respect to the MHPS business for a two-year period.
The Acquisition is subject to regulatory approvals and other closing conditions, including shareholder approval at a Konecranes Extraordinary General Meeting of shareholders, and is expected to close in early of 2017. If the Konecranes shareholder approval is not obtained, Konecranes will be required to compensate Terex’s transaction expenses up to USD 20 million.
As a result of entering into the Stock and Asset Purchase Agreement, the companies terminate the Business Combination Agreement and Plan of Merger announced on August 11, 2015, with no penalties incurred by either party.
Konecranes has agreed to seek listing of American Depositary Shares representing its ordinary shares, on the New York Stock Exchange after the completion of the Acquisition.