Nichols: Fantuzzi will add to Terex global infrastructure portfolio

As reported in Cranes Today August, Italian port crane manufacturer Fantuzzi has been looking for new investors since the beginning of the year. The need to find a buyer reached crisis point in recent weeks, as a EUR55m bond repayment deadline approached, and was then missed. Fantuzzi's lawyers drew up a shortlist of potential buyers, including Terex, Manitowoc, Kalmar and Konecranes.

Fantuzzi's product line includes ship-to-shore, rail and rubber tired gantry cranes (34% of its product mix), straddle carriers (30%), reach stackers and forklifts (28%) and harbour mobile cranes (8%). Revenues are split between Europe, the Middle East and Africa (56%), Asia (27%), North America (11%) and Australia/New Zealand (6%). It has manufacturing facilities in Italy, Germany and China.

The obvious link to draw between Terex's current business and Fantuzzi is the cranes division, and subsidiary PPM's reachstacker products. However, Terex's vision for the business goes further than that. Nichols says, "Fantuzzi will become part of the Terex Cranes business. We haven't defined the structure yet, but it will report through the cranes group. We did not view this acquisition from the point of view of the stacker product line. We're in the infrastructure equipment business, through our construction, cranes and other business segments. Fantuzzi adds a product portfolio to allow us to extend further into the ports and intermodal transportation areas of the global infrastructure business."

In a release announcing the deal, Terex chairman and CEO Ron DeFeo said, "This acquisition provides us with an important growth opportunity in the intermodal transportation area of infrastructure. The acquisition is an excellent fit with our strategy of expanding our market presence in related product areas and is a natural extension of our cranes business. We expect this acquisition to be accretive to Terex earnings per share by the end of 2009."

First of all though, the Terex cranes president explained, the deal needs to be completed: "Terex has a definitive agreement to acquire the Fantuzzi businesses for a total consideration of EUR215m. This includes all assets and debts. However, the deal is not closed. It has to go through regulatory approval. We expect that this will be straightforward from a regulatory point of view, as we currently have a fairly small port equipment business with the PPM reachstackers." In the press release, Terex predicted that it will close the deal in the fourth quarter of 2008.

As a result of the deal, Terex will take on Fantuzzi's existing debt, including the missed EUR55m bond repayment. Not included in the current deal is the land that some of Fantuzzi's factories are built on; this is owned by the Fantuzzi real estate business, separately from the manufacturing business. Nichols explained that Terex's factories are already operating under a range of real estate arrangements: " We already have some facilities on land we own directly, and some on land we lease. We haven't gone through what consideration we'll operate under here. We work with a variety of real estate structures, including leasing land from proprietors on a long term basis. We'll do what works best for the business."

Once these details are completed, Terex will face the challenge of dealing with the financial troubles that pushed Fantuzzi into seeking new investors, despite earning EUR447m last year. Key to this will be the lean manufacturing techniques Terex is implementing group-wide.

Nichols says, "Fantuzzi has good technology, good customers, and good customer relations. There are businesses in Fantuzzi that are very profitable. Terex has been very busy over the past three or four years implementing the Terex Business System, which emphasizes lean manufacturing as a central tenet of a comprehensive management platform. It is our intention to grow this business and make it a profitable contributor to Terex.

"The Noell and Fantuzzi operations have a lot of very good people, in China, Germany and Italy. It is still early in the process. We have much to assess in the weeks ahead and it is simply too early to discuss plans at this juncture. Generally speaking, we will want to make sure we are all moving in the right direction. We'll supplement the existing team with some of our Terex Business System people for the lean skills they bring to the equation.

Nichols concludes, "This is an exciting opportunity for Terex. I truly believe Fantuzzi has good products, good technology and good customer relationships. We're excited to have new team members coming on board from Fantuzzi. We're eager to get through the regulatory approvals and closing process so that we can get together, to correct the challenges Fantuzzi faces and to grow the business."