Summary
TEX Received a Bid from Chinese Zoomlion to buy the company at $3.3 billion.
The offer from Zoomlion represents a 100% premium and the TEX stock price has increased around 70% since the offer was made public.
In 2014, Zoomlion’s profits declined by 80% and this bid is a desperate measure to diversify their operation and gain international exposure.
Zoomlion’s revenue is much lower than TEX and they would need a large financial backing to pull this deal off.
We believe Zoomlion will not be able to conclude the transaction and secondary investors should reduce their exposure of TEX at current market price to get out while they are.
Company Overview
If you have ever been to a construction site, there is good chance that you have seen the equipment made by Terex Corporation (NYSE:TEX). They mostly provide heavy duty industrial equipment for lifting and handling materials. Terex Corporation’s operation spans over several sectors, including aerial work platforms, construction, cranes, material handling & port solutions, and materials processing.
Besides offering material handling solutions to various industries, they also understand that companies using their products would need to commit large amounts of capital to purchase those products. Hence, Terex Corporation also offers a range of financial products and services in order to help their customers smooth the transaction process without involving third parties. A separate entity called Terex Financial Services handles the financing part of the process.
While the bulk of Terex Corporation’s equipment is manufactured in a handful of key locations in North America, Europe, and Australia; they market their products all over the world.
Zoomlion Joins the Bidding War
Last week, Zoomlion, the Chinese equipment maker – according to some the “Chinese Caterpillar” – made a $3.3 billion offer to buy Terex Corporation. At the time of placing the bid by Zoomlion, Terex Corporation’s stock price was trading around $13.30 per share, with a market cap of under $2 billion. Zoomlion offered $30 per share to buy the company, effectively offering a 100% premium – all cash!