First Quarter Losses for Zoomlion Raise Questions About Terex Acquisition

Zoomlion posted a first quarter loss of 660.3 million yuan renminbi (about U.S. $101.5 mlllion), causing some analysts to express doubts regarding Zoomlion’s ability to finance its bid to acquire Terex Corp. for $3.4 billion. With Chinese equipment manufacturers facing a glut of unsold equipment and soft earnings, prospects over a potential acquisition of Terex appear to have clouded.

Earlier this month, Zoomlion sought to provide assurances to Terex regarding its offer, people familiar with the matter told Reuters, saying it would cover the risk of the acquisition being approved by the Chinese authorities. One Chinese analyst, Xu Mingle of BOC International, was quoted by Reuters as saying: "It's possible that the results will affect the Terex deal," while another analyst, John Hu of Morningstar, said: “"I think Zoomlion's management should reconsider the Terex deal as its Q1 earnings hit a record low. Is it worth spending so much money on Terex?"

With the Chinese market struggling, Zoomlion is apparently attracted to the access to the North American market that Terex would provide.

Zoomlion earlier this year made an unsolicited bid to acquire Westport, Conn.-based Terex Corp., which put merger efforts with Finland’s Konecranes on hold while it worked on negotiating a deal with Zoomlion. Negotiations between Zoomlion and Terex are continuing.