Decision to call off negotiations comes after Chinese giant’s record quarterly loss and speculation about government control – reports
Failure to agree on price was the only reason for termination of talks to acquire US-based construction equipment maker Terex, Chinese heavyweight Zoomlion was reported as saying on Tuesday.
Amid speculation in the market about the reasons for Zoomlion’s decision to call off the acquisition talks – with Chinese governmental control, an inability to procure funds and Zoomlion’s first-quarter loss all being cited as possible reasons – a senior official of the company said disagreement over the price was the only factor.
Speaking to the Chinese media, Sun Changjun, vice president of Zoomlion, said it was tempting for the market to attribute the failure of a Chinese takeover to issues such as lack of support from Beijing or Chinese foreign exchange controls.
But Zoomlion had already secured written approval from China’s National Development and Reform Commission ahead of the first round of the non-binding bidding last November, the executive noted.
The deal was not subject to foreign control, he told Xinhua, as China is encouraging its equipment manufacturers to branch out abroad.
Earlier, a statement released by Zoomlion said that “although the parties to the transaction have made their joint efforts to closely negotiate on the proposed transaction recently, no agreement can be reached on the crucial terms. The company therefore decided to terminate the negotiation in relation to the proposed acquisition of Terex”.
Zoomlion had made Terex an offer of $3.4 billion, or $31 per share, in its March bid – but later pressed for a downward revision after Terex decided to sell its material handling and port solutions (MHPS) business to Finland’s Konecranes.
Terex said in a press release last week that Zoomlion “was unable to provide a fully-financed, binding proposal for the purchase of Terex with or without MHPS. This ends the prolonged period of uncertainty that this process has brought to Terex and its customers, team members and shareholders”. Sale of its MHPS division to Konecranes will proceed, Terex added, with the former paying approximately $1.3 billion for the purchase.
Refuting concerns over Zoomlion’s ability to secure funding, Sun said its offer was 40% funded by its own cash and 60% by bank loans, for which it had received commitment letters from several Chinese lenders.
The Chinese company earlier reported a record quarterly loss for Q1, 2016, amounting to $101.50 million, in what was speculated as another reason for Zoomlion calling off the acquisition.
The company previously said that it 2015 annual profit was the lowest in 15 years, and the fourth consecutive year of decline.