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Terex Sells Off-Highway Truck Business to Volvo for $160 Million


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Business Wire / December 9, 2013

Terex Corporation (TEX) today announced that it has agreed to sell its truck business to Volvo Construction Equipment for cash proceeds of approximately $160 million. The truck business manufactures and sells off-highway rigid and articulated haul trucks. Included in the transaction is the manufacturing facility in Motherwell, Scotland. The sale, which is subject to government regulatory approvals and other customary closing conditions, is targeted to close in the first half of 2014.

“The truck business has been an important part of our company for over three decades and continues to produce world class products with dedicated and talented employees,” said Ron DeFeo, Terex Chairman and CEO. “However, trucks no longer fit within our changing portfolio of lifting and material handling businesses. I am confident that the truck business will benefit by joining a company sharing similar competencies and offering complementary products and services. We are pleased to have entered into this agreement with Volvo, which represents a strong strategic buyer for the business who values our distribution network and team members.”

Mr. DeFeo continued, “The sale of the off-highway truck business reflects our strategy to manage our portfolio of businesses and focus on those businesses that provide the greatest returns for our shareholders. We recently announced the initiation of quarterly cash dividends to our shareholders and a share repurchase program and the proceeds from this sale aid our efforts to improve our financial efficiency and implement these programs.”

Commenting on the rationale of the deal Volvo CE’s president, Pat Olney said: “This is a strategic acquisition that offers Volvo CE considerable scope for growth. The addition of a well-respected range of rigid haulers extends the earthmoving options for customers involved in light mining applications at a time of renewed confidence in the sector. The addition of TEL’s articulated hauler range will enhance our position in this segment, particularly in high-growth markets. We believe that the Motherwell facility and its global team members, as well as the current distribution partners, are valuable to the success of the business in the future.”

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Bloomberg / December 10, 2013

Volvo to Sell North American Equipment Rental Business

Volvo agreed to sell its unprofitable North American construction-equipment rental business to Platinum Equity for US$1.1 billion (7.2 billion krona) to focus on manufacturing.

The disposal of the Volvo Rents unit will result in a US$229 million (1.5 billion krona) cost this quarter and is targeted for completion in the first three months of next year, the Gothenburg, Sweden-based company said today in a statement.

Chief Executive Officer Olof Persson is shifting Volvo’s focus to profitability from sales growth. The truckmaker laid out a strategy in 2011 to achieve operating margins at the top of the heavy-equipment industry, and it’s exiting businesses unrelated to making commercial vehicles and construction machinery. Volvo Rents posted a nine-month operating loss of US$7.2 million (47 million krona), the parent company said today.

“The sale value looks good for a loss-making business,” said David Arnold, a London-based industry specialist at Barclays Plc’s investment-banking unit. “The cash inflow should allow the company to maintain the dividend, albeit in a low-quality fashion.”

The rental unit, which has about 2,100 employees, operates 130 outlets in North America and offers equipment for construction, commercial and industrial markets. Nine-month sales amounted to US$474 million (3.1 billion krona). A decline in contract renewals at the rental business in the U.S. contributed to a 30 percent sales drop at Volvo’s construction-equipment division in the region.

“We looked at different alternatives to grow Volvo Rents’ business and concluded that the best alternative is to sell the operation to another owner,” CEO Persson said in today’s statement. The unit “does not have a sufficiently strong connection with the group’s core operation to motivate continued ownership.”

Net debt at Volvo’s industrial operations will be reduced by about US$1.1 billion by the sale, the Swedish company said. The manufacturer will continue to sell products to the rental business under the new owners. Customers, including companies in the oil and gas, metal-production, infrastructure, power and mining industries, aren’t expected to be affected by the transaction, Volvo said.

California-based Platinum Equity also owns the Maxim Crane rental and lifting service and Nesco, a provider of electrical-utility equipment. The U.S. private-equity firm will fund the Volvo Rents purchase through a debt sale.

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