The bid is the latest Chinese outbound M&A deal to fall through, making bankers and potential acquisition targets wary
China’s Zoomlion Heavy Industry Science & Technology Co. walked away from a proposed multibillion-dollar acquisition of U.S. crane maker Terex Corp., the latest Chinese takeover deal to fall through.
The Chinese maker of cranes and bulldozers had been in takeover negotiations with Connecticut-based Terex since late January, when it shouldered aside another suitor and made a $3.3 billion bid for the company. On Friday, Zoomlion said in a statement that “no agreement can be reached on the crucial terms.”
Two people familiar with the situation said Zoomlion and Terex couldn’t agree on price. Three other people also said Zoomlion didn’t complete financing for the deal.
Zoomlion’s bid is the latest in a string of Chinese outbound M&A deals to fall through recently—a record that has started to make bankers and potential acquisition targets wary of dealing with Chinese buyers. One of the most prominent was Anbang Insurance Group Co.’s abrupt dropping of a $14 billion bid to buy Starwood Hotels & Resorts Worldwide Inc. The acquisitive Chinese insurer, which had started a bidding war with Marriott International Inc. for the hotel chain, suddenly dropped its offer in March, citing only “various market considerations.”
Such behavior, as well as the intense scrutiny Chinese takeovers often attract from regulators such as the U.S. Committee on Foreign Investment, has made deal makers view acquisitions by Chinese companies as riskier than normal, bankers say. That wariness also accompanies a record overseas buying spree by Chinese companies, which have announced $119 billion in outbound deals as of Monday. That is more than the $107 billion for all of 2015, according to Dealogic.
Zoomlion’s pursuit of Terex started in January, when it made an unsolicited all-cash $3.3 billion bid for the company. The bid halted a previously agreed all-stock merger between Terex and Finnish crane maker Konecranes Oyj. In March, Zoomlion raised its bid to $31 a share, or $3.4 billion.
Terex had been pressuring its Chinese suitor to fully finance and complete the offer, people familiar with the deal said. Finally, on May 16, the U.S. company said it would sell part of its crane business to Konecranes for $1.28 billion in cash and stock, unless it reached an agreement to sell the entire company to Zoomlion by May 31.
Partly owned by the Hunan provincial government in central China, Zoomlion had tapped a number of state-owned banks, including China Development Bank, China Construction Bank and Bank of China, to fund the Terex deal, according to people familiar with the situation. China Development Bank was expected to lead the financing, they said. However, the policy bank had not yet provided a commitment letter to the company, one of the people said.
Chinese officials have been trying to slow a money exodus from the country, making life tougher for companies that need to trade the yuan for dollars to do business. The country’s foreign-exchange regulator in recent months had asked banks to increase scrutiny of foreign-currency transactions, The Wall Street Journal earlier reported, which could be a delaying factor in many of China’s outbound deals, according to bankers and lawyers.
