Following Konecranes’ acquisition of Terex MHPS – which in effect, is Demag Cranes, Hoists, Material Handling and Ports Solutions – the two global crane brands will share their considerable combined knowledge and technology, becoming a substantial force in the lifting business in sub-Saharan Africa.
The acquisition improves Konecranes’ position as a focused global leader in the industrial lifting and port solutions market. Konecranes stands to achieve substantial growth opportunities in the service business, already a stronghold of the company in Southern Africa. Konecranes has a long history of conducting routine service inspections, repairs, and refurbishment of Demag cranes.
In South Africa, the merger also extends to the Wolff Cranes brand, acquired by Demag in the late 1980s. In terms of the port-material segment, this includes handling technology, with a broad range of manual and semi-automated solutions under the Gottwald and Noell brands.
Knut Stewen, Konecranes’ Managing Director, Southern African Countries, and Vice President, Head of Region, Africa, said: “We are extremely proud to combine forces with Demag. We want to provide a home for Demag and Port Solutions, from which these businesses can grow and become stronger as part of our joint organisation. The acquisition makes it possible for us to realise a long list of synergies between our two companies. We will be a single technology company, ready to create the next generation of lifting.”
This sentiment was echoed by John Haarhoff, Managing Director of Demag MHPS: “We strongly believe that, in the long term, sharing combined technology will allow the two businesses to develop solutions that will further improve the productivity and safety of the Demag, Wolff and Konecranes brands. Together we will aim to excel at providing the services our customers require.”
In a first joint effort, the Demag/Konecranes team signed a three-year service and maintenance contract for Arcelor Mittal’s Saldanha Steel Mill, which will require a supervisor and four technical teams on-site.
Miikka Kinnunen, Vice President, Investor Relations, explained: “Konecranes is well-prepared to deliver expected synergies, based on the extensive integration planning work carried out jointly with Demag over recent months. Of the total of €140 million per annum synergies targeted within three years, €35 million is expected to be implemented within 12 months from 1 January 2017, from which date the MHPS Acquisition is deemed effective from a financial point of view. Overall, synergies will come from procurement, operations, and SG&A. One-time implementation expenses are expected to amount to €130 million, with €60 million worth of anticipated capex. In addition, dynamic synergies related to new opportunities in global service operations are expected to lead to significant earnings growth.”
Kinnunen added that the consideration for the Demag business was US$595 million and €200 million in cash, and 19.6 million new Class B shares. Pursuant to the Stock and Asset Purchase Agreement (SAPA) dated 16 May 2016, the final cash consideration is subject to post-closing adjustments for cash, debt, working capital, and the closing of the sale of the STAHL CraneSystems business. The final number of Class B shares may be subject to certain adjustments, in accordance with the SAPA. Based on 2015 financials, Konecranes and Demag had aggregated sales of about €3.5 billion, an adjusted EBITDA of €267 million, and a total workforce of about 19 000.