When Opportunity Knocks, Answer the Door.
Courtesy of Paul Price at Guru Focus
Market action can tell you a lot about the probability of a buyout proposal actually going through.
Hong Kong-based Zoomlion Heavy Industries had made a firm offer to acquire Terex (NYSE:TEX) after raising its offer from $30 to $31, outbidding Finnish company Konocranes Plc’s (KNCRY) earlier all-stock takeover bid, recently worth only about $20 for each TEX share.
Terex’s approximately $25/share market price told us that traders were skeptical that a deal would go through.
Management at Terex had hedged its bet on May 16, 2016, when it agreed to sell its material handling and port-solutions division to Konocranes for $1.28 billion. That unit accounted for $1.44 in 2015 revenues, but lost $8.6 million last year, mostly due to negative currency fluctuations.
Now that Zoomlion has left the scene Terex avoids a $37 million break-up fee which would have been due to Konocranes. If the less-than-full-company sale closes, TEX will instantly become more profitable while also sprucing up its balance sheet.
A rekindling of a full-blown takeover by Konocranes is still a rumored possibility.
Terex now looks quite inexpensive. Its shares routinely traded at much higher levels during the past four or five years. From late 2006 through early 2008, before The Great Recession, TEX had established all-time highs ranging from $66 to north of $96 per share.
