Terex Corporation announced on 17 May that it has entered into an agreement to acquire Demag Mobile Cranes GmbH & Co. KG.

The price is $150m – about $50m to $80m below book value.

Once the deal is complete, Terex will restructure to recreate Terex Cranes, a worldwide business to be headed once again by Fil Filipov.

The deal follows many months of industry speculation and comes just weeks after Manitowoc announced that it was buying Grove. Many, including Demag employees themselves, thought that Manitowoc would buy Demag which was put up for sale by its parent company, Siemens, last year.

Demag, which manufactures and distributes telescopic and lattice boom cranes, is one of the leading mobile crane producers worldwide, with 2001 revenues of approximately $360 million. The transaction is subject to customary closing conditions, including regulatory approval, and is anticipated to close at the end of the second quarter or early in the third quarter of 2002.

“The acquisition of Demag is an excellent opportunity for us,” said Terex chairman and chief executive officer, Ron DeFeo, . “From a strategic perspective, it improves our position in the all-terrain crane market, which has been a growing market category over the past several years, and gives us a product offering that fills gaps in the current Terex crane product line. When combined with our rough terrain and truck crane businesses, it will give us a product offering in the mobile telescopic crane market second to none.”

  DeFeo continued: “Demag also has a leading market position in the 300-ton to 1,600-ton lattice-boom crane category, which compliments our existing product offering nicely and enables us to offer our customers a full line of lattice boom cranes with lifting capacities from 60 tons to 1,600 tons. The combination of Demag and Terex will create a worldwide crane company with one of the broadest geographic and product offerings in the industry. We expect the acquisition to add $360 million in pro forma annual revenues and be accretive by $.20 to $.30 per share after planned cost reductions are implemented.”

DeFeo also pointed out that Terex had now acquired a leading all terrain and crawler crane manufacturer, plus a significant tower crane business through the Comedil and Peiner acquisitions in 1999, for a total sum of about $180m. “And we got more for our money than others who paid more,” he added, in a clear reference to Manitowoc that has spent about $570m in the past two years acquiring Potain and Grove.

  “The Demag acquisition provides Terex with access to leading technology and high-end product lines,” said Fil Filipov, Terex executive vice president, who will assume responsibility for the Terex crane business worldwide upon completion of the acquisition. The reformed Terex Cranes will have close to $800m in revenues and is aiming for more than $1billion within 12 to 24 months.

“Demag is known in the market place for its product innovation, quality and excellent after sales service. Demag will provide Terex with an all-terrain product offering that will enable us to compete effectively in the European market place, which is the largest all-terrain market. It also positions us to compete in the growing North American all-terrain market, where we think there is a real opportunity to be aggressive and grow share by leveraging Terex’s strong market presence in mobile telescopic cranes in combination with Demag’s outstanding technology and customer care.”

Filipov said: “The acquisition brings with it three production facilities, two in Zweibrucken, Germany and one in Pecs, Hungary, with over 460,000 square metres of production capacity. We have targeted $20 million in cost savings through the outsourcing of non-core activities, streamlining of the production process and improvements in purchasing. We will also be looking for ways to better leverage our German organisation and take advantage of low cost production capabilities in Eastern Europe.”

DeFeo added: “The Demag acquisition meets our internal criteria for acquisitions. It provides both geographic and product diversification that fills a strategic need within our product offering and solidifies our European franchise. Demag provides substantial opportunities for synergies and cost savings, and we believe it will be accretive to earnings in the first 12 months of ownership and achieve a 20% return on invested capital in year two of ownership. Although there is a lot of work to be done, we believe the Demag acquisition strengthens the Terex franchise, positions us to compete as a leading worldwide global crane company, and, most importantly, creates shareholder value.”