Terex to Sell Mining Business to Bucyrus; Invest in Niche Markets

Jan. 1, 2010
WESTPORT, Conn. Terex Corp. last month announced that it signed a definitive agreement to sell its mining business to Bucyrus International for $1.3 billion

WESTPORT, Conn. — Terex Corp. last month announced that it signed a definitive agreement to sell its mining business to Bucyrus International for $1.3 billion in cash. The products to be divested by Terex in the transaction include hydraulic mining excavators, electric-drive mining trucks, track and rotary blasthole drills, and the highwall miner, as well as the related parts and aftermarket service businesses, including the company-owned distribution locations. Terex plans to invest the proceeds of the sale into acquisitions of machinery and industrial companies in niche markets where it can have more market impact, according to Terex chairman and CEO Ron DeFeo, who said his goal is to double Terex' annual sales by 2012.

“We're going to refocus the company toward machinery and industrial niches,” DeFeo said. “We're going to take this company to places it hasn't been before.”

The transaction, which is subject to customary regulatory approvals, is expected to close in the first quarter of 2010.

“This transaction accelerates the transformation of Terex Corporation as we move from a Construction and Mining Equipment Company to a Machinery and Industrial Products business,” said Ron DeFeo, Terex chairman and CEO. “Going forward, we will focus on products and services where we can maintain and build superior customer propositions with high returns on capital for our owners. The current environment plus this transaction provide an excellent opportunity to create value. We plan to execute the changes needed to make this happen.”

South Milwaukee, Wis.-based Bucyrus manufactures mining equipment for surface and underground mining. The acquisition will double its market to more than $30 billion, add complementary services to its business and broaden its geographic reach, the company said.

“The sale of Mining to Bucyrus is good for customers, team members and shareholders,” said DeFeo. “It is a classic proposition that strengthens the mining business for its customers and team members. For Terex, the attractive cash offer provides us excellent financial flexibility, as our cash balance will substantially equal our outstanding indebtedness. The approximately $1 billion of after-tax proceeds will allow Terex to invest in its current, high return-on-capital businesses, or to look to add new, well positioned niche manufacturers with strong market presence to the company's portfolio.

“Mining is a highly capital intensive business. 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. We are confident that both companies' stakeholders will benefit from the transaction, with our mining customers being the ultimate beneficiaries. The journey to make this a great business will accelerate under the leadership of Bucyrus, which has a historically strong presence in surface mining with its rope shovel and dragline products.”

Under terms of the transaction, Terex has the option to receive up to $300 million of the purchase price in Bucyrus stock, based on its current trading price of around $66.16 at press time. Bucyrus has reached a deal with some lenders that will help finance the transaction, combined with increasing its existing credit agreement and securing a new term loan facility.

The acquisition will increase the number of Bucyrus' employees to nearly 10,000 at almost 100 locations globally. The company also said it expects to achieve more than $100 million in annual run-rate savings by 2012 from consolidating manufacturing plants, combining management function and lowering expenses.

Goldman, Sachs & Co. acted as financial advisor to Terex on this transaction. Bryan Cave LLP acted as counsel to Terex on this transaction.

Terex Corp., Westport, Conn., is a diversified global manufacturer with 2008 net sales of $9.9 billion. Terex operates in four business segments: Terex Aerial Work Platforms, Terex Construction, Terex Cranes, and Terex Materials Processing & Mining.