Volvo Construction Equipment has agreed to acquire the off-highway hauler business of the Terex Corp. for about $160 million on a cash and debt-free basis. The deal includes related assets and intellectual property. Subject to customary regulatory approvals, the transaction includes Terex’s main production facility in Motherwell, Scotland, and two product ranges that offer both rigid and articulated haulers.
The purchase also includes the distribution of haulers in the United States as well as a 25.2-percent holding in Inner Mongolia North Hauler Joint Stock Co. (NHL), which manufactures and sells rigid haulers under the Terex brand in China. NHL is listed on the Shanghai Stock Exchange.
“This is a strategic acquisition that offers Volvo CE considerable scope for growth,” said Volvo CE president Pat Olney. “The addition of a well-respected range of rigid haulers extends the earthmoving options for customers involved in light mining applications.”
In 2012, the businesses in the acquisition, excluding NHL, had net sales of about $370 million and an operating income of about $33 million. In the first nine months of 2013, net sales amounted to approximately $172 million, with operating income of about $5.5 million.
The holding in NHL will likely be accounted for using the equity method in accordance with IAS 28. The purchase price amounts to about $160 million on a cash and debt-free basis. The acquisition will increase the Volvo Group Industrial Operation’s net financial debt by about SEK 1 billion (about U.S. $160 million), Volvo said.
The acquisition includes five models of rigid haulers, with proven designs and payloads ranging from 32 to 91 tons. The introduction of rigid haulers will extend Volvo CE’s position in light mining, an industry area that is complementary to general construction, oil and gas, aggregates and quarrying and road building, all segments Volvo CE is already active in.
“The truck business has been an important part of our company for more than three decades and continues to produce world-class products with dedicated and talented employees,” said Ron DeFeo, Terex chairman and CEO. “However, trucks no longer fit within our changing portfolio of lifting and material handling businesses. I am confident that the truck business will benefit by joining a company sharing similar competencies and offering complementary products and services. We are pleased to have entered into this agreement with Volvo, which represents a strong strategic buyer for the business who values our distribution network and team members.
“The sale of the truck business reflects our strategy to manage our portfolio of businesses and focus on those businesses that provide the greatest returns for our shareholders. We recently announced the initiation of quarterly cash dividends to our shareholders and a share repurchase program and the proceeds from this sale aid our efforts to improve our financial efficiency and implement these programs.”
The deal also adds three models of articulated haulers to Volvo’s portfolio, with payloads ranging from 25 to 38 tons. The machines support Volvo CE’s already established position in the articulated hauler segment, and offer an extensive field population and opportunities for growth in emerging economies.
If approved, the acquisition adds about 500 employees to Volvo CE’s workforce, and allows for the continued use of the Terex brand name on the acquired machines for a transition period.
The transition is expected to be finalized during the second quarter of 2014.
