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Demag Cranes AG (D9C.XE) accepted an improved buyout offer from Terex Corp. (TEX) Thursday that includes a 9% increase in the sale price and a pledge from Terex to maintain the German crane maker's factories and management team after the purchase is completed.
Under a plan endorsed by the two companies' boards, Terex would pay 45.50-euros-per-share for Demag's stock, up from EUR41.75 per share offered by Terex on May 2. The increase would raise the overall purchase price to $1.36 billion, or EUR963.4 million, from $1.31 billion, or EUR884 million.
The revised offer is subject to approval by Demag shareholders. In early trading Thursday, Demag's stock was up 2.5% at EUR45.52 per share.
"Apart from a significant increase of the offer price, we achieved important assurances by Terex regarding the interests of our employees," Demag CEO Aloysius Rauen said in a written statement.
Terex would allow Demag to operate as an autonomous unit of Terex under Rauen's leadership. Demag's management board also would retain strategic and operational responsibility for the business. Demag said Terex agreed to refrain from mandating a restructuring plan on Demag for three years and will uphold union contracts, shop agreements and other employee rights currently provided by Demag.
Moreover, Terex pledged to maintain Demag's headquarters in Dusseldorf and preserve its four production sites in Germany for five years.
"The company is professionally managed, with highly motivated staff, and Terex will draw on this for both Demag Crane's ongoing success and the future of Terex as a whole," Terex Chairman and Chief Executive Ron DeFeo said in a written statement.
DeFeo was able to accommodate Rauen's demands that Demag function as an independent unit because the two companies' business lines have almost no overlap, aside from cargo-handling cranes for ocean ports. Demag's main products are cranes and hoists for factories and warehouses.
Connecticut-based Terex, meanwhile, manufactures a variety of specialty construction equipment, including tower cranes for building skyscrapers, rock-crushing equipment, road paving machinery and aerial work platforms. The combined sales of the two companies would have amounted to about $5.8 billion in 2010.
Terex has struggled to turn a profit since the collapse of the construction industry in the U.S. and Europe in 2008. DeFeo, who built the company through some 50 acquisitions since 1995, has been looking for acquisitions to lessen Terex's exposure to highly cyclical end markets.
Demag's product lines fit DeFeo's requirements, but the company's management steadfastly refused Terex's attempts at initiating talks for a purchase. As a result, Terex resorted to a tender offer last month to buy the shares of Demag's stockholders.
Terex's price of EUR41.75 a share amounted to a 15% premium to Demag's stock price before the May 2 offer. But the offer was rejected by Demag's management and major shareholders as being too low.
For the past month analysts have predicted that Terex would likely have to raise its offer to acquire Demag.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; email@example.com