Terex has revealed a hostile €884m ($1.3bn) takeover bid for rival crane maker Demag Cranes, in a surprise move that could spur a bid battle.
The US construction equipment and crane maker said it would offer €41.75 a share for the German group, pushing Demag’s share price up 22 per cent to €44.32 on Monday.
Demag declined to comment on Monday as its management sought to assess the bid.
The offer has come after six months in which Demag’s management has fought against several approaches and persistent takeover rumours that have pushed the group’s share price sharply higher and attracted a large number of hedge funds to the stock.
Finland’s Konecranes, the global market leader, tabled a merger proposal in October that was subsequently rejected by Demag, the world’s second-largest crane maker by sales behind Kone.
Terex’s bid came after past talks with management failed to reach an agreement. The group said it tried to engage the German company in dialogue for more than a year.
The US group, which is being advised by Goldman Sachs and Commerzbank, said its offer represented a premium of 15 per cent to last Friday’s closing price.
But analysts voiced some scepticism, pointing to the expectation of a possible counter bid and a share price that has already risen significantly above the offer. Analysts have issued share price targets of up to €52 in the past few months.
But the Terex offer carries only a 51 per cent minimum acceptance rate, which makes a successful bid more likely. Demag has no strategic anchor shareholder and its two largest shareholders, Cevian Capitaland Centaurus Capital, are both hedge funds.
Centaurus, a UK activist hedge fund that owns more than 5 per cent of the share capital, called on Demag management in February to “immediately” assess a merger with Konecranes or another potential partner.
At the group’s shareholder meeting in March, investors pushed management to talk with suitors. But Aloysius Rauen, Demag chief executive, dismissed such demands, saying a merger made no sense.
Ronald DeFeo, Terex chief executive, said a merger would create an entity with $5.8bn in revenues and a strong footprint in Europe and emerging markets.