Tadano to acquire Demag

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Terex has announced that it will sell its Demag mobile crane business to Tadano and stop producing cranes in North America.The deal includes the Demag manufacturing facilities in Zweibrücken, Germany along with multiple sales and service locations including the equity in eight companies:Terex Cranes GermanyTerex ScandinaviaTerex Cranes SpainTerex Cranes UKTerex FranceTerex Cranes Real Estate – FranceTerex Cranes Real Estate - GermanyDemag IP HoldingsTadano is paying around $215 million for the entire Demag business, which it says is roughly equivalent to its enterprise value.The transaction is expected to close mid year, subject to regulatory approvals. Terex will continue to manufacture tower cranes and Rough Terrain cranes in Italy. While the Franna pick & carry cranes in Australia will join the Terex Materials Processing business. The company also announced plans to cease manufacturing cranes in North America which are currently made at a shared Terex plant in Oklahoma City.Terex chief executive John Garrison said: “The dedicated Demag Mobile Cranes team members have made significant contributions to Terex and to the crane industry. The sale is based on strong industrial logic, as the Demag Mobile Cranes business will become part of a global crane company with complementary products and capabilities. We are pleased to have entered into this agreement with Tadano, a strategic buyer who values the Demag Mobile Cranes brand, technology, distribution network and team members.”“In addition to selling the Demag business, Terex will exit the North American mobile crane product lines manufactured in our Oklahoma City facility. These changes will simplify our Oklahoma City operation, which will continue to produce telehandlers and re-manufactured units for our Aerial Work Platforms segment and various products for our Materials Processing segment. Although we are exiting the OKC-based mobile cranes products, we will continue to sell parts, and offer service and support to our customers.”Tadano chief executive Koichi Tadano added: “This is a strategic acquisition that offers Tadano considerable scope for growth. The addition of the well respected Demag brand of All Terrain cranes and large crawler cranes range extends our product lines and options for customers. The addition of the Demag branded mobile crane product lines will enhance our global position in this segment. We believe that the Zweibrücken facilities and its global team members, as well as the current distribution partners, are valuable to the future success of the business.”This announcement has taken us a little by surprise, the company did postpone the publication of its annual results last week, suggesting that something important was going on, and there were a few other clues out there, but it has been a relatively well kept secret.The move is an interesting one, Terex has been struggling with the mobile crane business for some time, it had taken some very positive steps in the past couple of years, to repair earlier errors, one of which included bringing back the Demag name in 2016, which has had a greater impact on the German business than many expected.The move will free Terex to focus on those parts of the business that have been doing particularly well, and where it has very strong market positions, such as Genie, Terex tower cranes and Terex Utilities, as well as the Powerscreen materials processing business.At the same time it will take Tadano very close to taking global market leadership of the mobile crane market, with annual revenues similar to those of Liebherr Ehingen and well ahead of Manitowoc, possibly as high as $2.4 billion (Terex never published a break down of revenues down between crane plants or types).The major challenge for Tadano will be what strategy to adopt - given that there is quite a bit of overlap between the two All Terrain product lines. However, Tadano gains a range of excellent large lattice crawler cranes, a new City type All Terrain crane and some large All Terrain models, a sector of the market that the company has faced some challenges entering.Tadano already has a substantial All Terrain crane plant in Lauf, Germany and the cranes produced there are among the most reliable in the industry. It could do a lot worse that continue to operate the two businesses as separate entities, gradually pooling the resources that will make them both more competitive such as purchasing, while sharing distributors in the markets where one of the two has no representation or a significantly stronger company store.More on this later.Interesting times Watch this space