Just days after the EU competition authorities gave the green light to Terex to complete its takeover of Fantuzzi group, Terex indicated that it may not go ahead with the purchase.
A contract worth E215M (US$271M) for the purchase of the Italy-based port equipment group, with production facilities in Italy, Germany and China, was agreed in early August.
As anticipated, the European Commission concluded that the transaction would not impede competition in the EU market. "Horizontal overlap between the parties’ activities is limited and they would continue to face several strong, effective competitors with significant market shares," said the Commission.
As is well-known the overlap is confined to just one product family – reach stackers (PPM Terex in France and Fantuzzi).
The Ukraine anti-trust authority has also signalled its approval to the deal and approval from Turkish regulators is expected soon.
However, according to a filing on Friday with the Securities and Exchange Commission, Terex requested additional information from Fantuzzi Industries to determine if “a material adverse change” had occurred within its ports business that could prevent the acquisition from being completed. Terex also said it wanted to make sure that all conditions regarding the Fantuzzi business had been met.
It is not clear exactly what Terex is driving at here, but Fantuzzi’s financial problems were a key justification made to the EU by both Terex and Fantuzzi to allow the deal to proceed.
In response to Terex’s statement, Fantuzzi expressed surprise that Terex should raise concerns just after the EU and Ukraine anti-trust approvals had been issued. In a statement, Fantuzzi said that no material changes have occurred since August.
“Terex’s concerns are wrong and unjustified and are not supported by any evidence. Fantuzzi Industries is in the final stages of all steps needed to formalise the closing and, besides the approval from the Turkish anti monopoly authority, only a few clerical matters are still open.”
Terex’s share price has fallen in recent months and, although performance has been strong in its cranes and materials processing & mining segments, the aerial work platforms (AWP) segment is struggling. Terex AWP reduced its global workforce by 6% in 3Q/2008 and a further 18% cut is expected by the end of this year. Terex construction is also cutting back on worldwide operations.
Terex slipped out of the S&P 500 index at the end of October, swapping places in the S&P MidCap 400 index with a foodstuffs manufacturer.
At the time the Fantuzzi purchase deal was announced, Terex's chairman and CEO Ron DeFeo said that it would not affect his company's planned shares repurchase programme.
However, it has now been speculated that Terex may prefer to use the money earmarked for the Fantuzzi purchase to buy back more of its own shares, authorisation for which has already been obtained.
At the current share price, the estimated reduction in outstanding shares would be about 28%, which would increase proforma 2008 earnings per share by 38% to US$8.4.
