Wednesday, August 12, 2015

Freight and Container Clients Watch as Crane and Fork Lift Truck and Materials Handling Makers Merge

Partnership Between American and Finnish Groups Will Cheat US Taxman
Shipping News Feature

FINLAND – US – Anyone who thinks the just announced merger of crane and materials handling manufacturers Konecranes and Terex is just about constructing a more efficient group for the benefit of customers should probably think again. Both companies supply port equipment such as ship-to-shore and mobile harbour cranes to ports around the world and, with a portfolio including straddle carriers and fork lift trucks, the general freight and container shipping market is well catered for. This latest move, certainly on the part of the US headquartered Terex, is however principally about one factor which outweighs any other – tax.

The new conglomerate will henceforth be headquartered in Finland, home of Konecranes, where 20% Corporation Tax is the order of the day. Compare this to the 35% chargeable in the US and one starts to see the advantage for Terex. Add to that the huge pot of cash which that group has earned overseas since outbidding its new partner for the German Demag group four years ago, which suddenly becomes more accessible, and the deal makes even more sense.

The pair describe the deal as ‘a merger of equals’  but despite this Terex shareholders will own approximately 60% and Konecranes shareholders will own approximately 40% of the combined company. Based on the two companies internal mid-term outlooks the parties would seek to achieve revenue growth of more than 10% and an operating profit increase of significantly more than 50% within three to four years from closing, compared to 2014. Stig Gustavson, chairman of the board of Konecranes, said:

“The combination of Konecranes and Terex is a defining step in the history of both companies. With a focus on Lifting and Material Handling solutions, Konecranes Terex will be in an excellent position to deliver enhanced growth in revenues and margins through several strategic advantages, including significant cross-selling opportunities. There is a common culture between the two organisations, with both companies having long histories of designing competitive and innovative solutions. Together, we will have the opportunity to expand what Konecranes and Terex have built and become even stronger in the future.”

Anyone wanting to know the full details of the merger can watch a 55 minute webcast the two companies released giving details of the ‘overall considerable strategic benefits’ which they insist will result from the deal. Pressures from crane makers in developing countries doubtless had some influence and Terex CEO, Ron DeFeo, commented:

“This merger brings together two great businesses and through synergies provides another lever that is within our control to deliver value-creation to both the shareholders of Terex and Konecranes. We have a deep respect for Konecranes and look forward to joining forces with them to build a stronger and more diverse company that will be in an excellent position to succeed in a dynamic and highly competitive global industry.”