Terex Talks Continue with Zoomlion Despite Potential U.S. Government Opposition

Terex Corp. is continuing discussions with China’s Zoomlion despite concerns that a transaction could be blocked by the Committee on Foreign Investment in the United States (CFIUS), according to a Reuters report.

CFIUS, a U.S. government agency that looks at deals that could pose potential security threats, has demonstrated concern regarding Chinese investments. It recently forced Phillips to abandon a $3.3 billion sale of its lighting business to a group backed by Chinese investors. Because Terex has priority-rated contracts with the U.S. government, an acquisition from a Chinese company could invite attention, as could the fact that Terex manufactures mobile cranes used in ports that are viewed as a critical part of U.S. infrastructure. Already a Chinese company Zhenua Port Machinery is operating in U.S. ports.

While Terex’s board has not said that it would abandon an agreed-upon merger with Finland’s Konecranes in favor of Zoomlion’s $3.3 billion unsolicited offer, it has not expressed concern about potential CFIUS attention. Terex has not commented on a potential deal with Zoonlion except to acknowledge that its board is discussing the proposal.

Port equipment made up about 11 percent of Terex sales, according to the company’s latest annual report.

Zoomlion offered $30 per share in cash for Terex, considerably more than Konecranes’ offer. Terex would have to pay Konecranes a $37 million termination fee under its merger agreement should its board change its recommendation on the transaction.

According to the Reuters report, Zoomlion could seek backing from the Chinese government to help finance a deal for Terex, which would likely increase CFIUS scrutiny. Zoomlion is partly owned by China’s Hunan province.

Terex's stock closed at $22.40, more than 40 percent higher than before the Zoomlion bid was announced.

To read Reuters’ full article, click on: http://www.reuters.com/article/us-terex-m-a-zoomlion-idUSKCN0V71NW