Marcato Discloses 5.1% Stake in Crane Maker Terex

Hedge fund plans to push for change at Terex but doesn’t offer specifics

By BOB TITA and MARIA ARMENTAL

Two months after Zoomlion abandoned its attempt to acquire Terex Corp., a San Francisco activist investor on Thursday has disclosed a 5.1% stake in the maker of construction cranes.

WSJ reports, Marcato Capital Management LP offered no specifics about the strategy behind its investment in 5.5 million shares of Terex, but in a regulatory filing it revealed it has already talked with Terex executives and expects to continue to engage in discussions about “enhancing shareholder value through various strategic alternatives or operational or management initiatives.”

Terex Vice President Tom Gelson said in a written statement that company executives “appreciate [Marcato’s] confidence in our business and management. We look forward to listening to ideas that could help improve our company.”

Analysts were skeptical about Marcato’s ability to quickly install value-enhancing changes at Terex, which was built through dozens of acquisitions starting in the mid-1990s. Its main business lines include tower cranes for building skyscrapers, cranes on trucks and motorized lifts for workers and materials. The company has mostly struggled to boost profit since the recession.

“This is not one that lends itself to a quick resolution, “ said Eli Lustgarten, an analyst for Longbow Research. “It’s is not an especially great company. It needs a lot of more work.”

Terex’s stock closed up 1.8% on Thursday at $23.55 a share.

In the past 12 months, Terex executives have been engaged in continuous talks about a merger or outright sale of the company. Based in Westport, Conn., Terex in August last year said it would merge with Finland’s Konecranes Oyj in an all-stock deal.

The company, however, put the Konecranes deal on hold early this year, when Zoomlion Heavy Industry Science & Technology Co., one of China’s largest construction-equipment manufacturers, made an informal and unsolicited offer for buy Terex for $3.4 billion in cash.

Terex executives complained that Zoomlion didn’t produce a fully financed, binding proposal for the purchase, even after months of discussions.

Then under an ultimatum from Terex, Zoomlion withdrew its offer at the end of May. That cleared the way for Terex to recast the original merger idea with Konecranes and sell just its lines of maritime port cranes and factory cranes to the Finns for $1.3 billion, which includes cash and a 25% stake in Konecranes.

Terex also recently said it would sell its compact construction equipment business in Germany to Yanmar Holdings Co. for $60 million.

Marcato was founded in 2010 with starter capital from buyout firm Blackstone Group LP. The hedge fund is managed by Mick McGuire, a protégé of activist investor William Ackman. The firm’s recent investments include restaurant chain Buffalo Wild Wings Inc.,Goodyear Tire & Rubber Co. and department store operator Macy’s.

The bulk of Marcato’s 5.5 million Terex shares were acquired through call options, purchased from June 10 through July 27, according to the filing. The call options grant Marcato the right to buy Terex shares at a $14 target price by Dec. 21, 2017.

Corrections & Amplifications:
Hedge fund Marcato Capital Management LP purchased 5.5 million shares in crane manufacturer Terex Corp. from June 10 through July 27. An earlier version of this article incorrectly stated the period as June 10 through June 27. (July 28, 2016)

Write to Bob Tita at [email protected] and Maria Armental at[email protected]