Terex to sell mining division to Bucyrus
By Murray Pollok21 December 2009
Terex is to sell its mining equipment business to Bucyrus International Inc for US$ 1.3 billion in cash and said the sale signified a shift from being a construction and mining equipment company to a machinery and industrial products business focusing on niche markets.
Ron DeFeo, Terex chief executive officer and chairman, said the deal would substantially cancel out Terex's debts and give it the financial flexibility to invest in its current businesses or to acquire niche manufacturers.
"We're going to refocus this company away from being a classic construction equipment and mining company to being a machinery and industrial product business", said Mr DeFeo, "Where we think we can develop highly successful product niches to build leading product specialists in categories like aerial work platforms".
Mr DeFeo said the company would be able to make acquisitions of specialist businesses to build on its existing niche companies, or invest in developing the existing businesses further. Funds available for acquisitions are limited to $200 million in each 12 month period from June 2009 and from June 2010.
"This is an industry that absolutely should consolidate, but hasn't", said Mr DeFeo, adding that, "We're going to look for number one or number two market positions in niche machines and in industrial product categories" Mr DeFeo said Terex would not be looking for acquisitions "far afield" from its existing businesses.
He said there was an opportunity to buy companies at the bottom of the cycle that had been "beaten down" by the recession.
With the sale of the mining division Terex's current business will comprise aerial work platforms, crushing and screening equipment, cranes and compact construction equipment.
The products being sold to Milwaukee-based mining equipment manufacturer Bucyrus include hydraulic mining excavators, electric drive mining trucks, track and rotary blasthole drills and the highwall miner. Brands associated with the mining business include O&K, Unit Rig, Reedrill, Superior Highwall, Halco and Hypac.
"Mining is a highly capital intensive business", said Mr DeFeo, "It would take us years to build the infrastructure to service and support new equipment sales in many of the key mining markets around the world where Bucyrus already has significant presence."
Bucyrus, which celebrated its 125th anniversary in 2005, supplies a range of surface and underground mining equipment, including drag lines, shovels, drills and belt systems. It will have revenues of around US$2.6 billion in 2009.
The Terex mining business has 38 worldwide and employs approximately 2150 people. Bucyrus said the deal will double its target market value from roughly US$15 billion to over US$30 billion "and create a team of approximately 10000 people in nearly 100 locations around the world." The transaction includes related parts and aftermarket businesses and the associated Terex-owned distribution locations.
Tim Sullivan, chief executive officer of Bucyrus, said; "We are extremely excited about acquiring Terex Mining and we believe that this is a unique opportunity to build an even stronger company for our customers, employees and shareholders.
"Customers will reap benefits from this transaction as Bucyrus will be able to offer a broad, complementary product line that is driven by technology, quality, and first class service. Through our extended product offering, we will continue to design and produce world-class machines and provide the best after-market support throughout the life of the equipment. We will expand our geographic footprint and diversify our portfolio of products across a broader range of commodities".
The transaction, which is subject to regulatory approvals, is expected to close in the first quarter of 2010.