HELSINKI, April 27 (Reuters) - Finnish crane maker Konecranes said it expects lower tax benefits than previously estimated from its proposed merger with U.S. Terex Corp, further undermining a deal already challenged by a rival bid.
Konecranes and Terex agreed to an all-share merger in August 2015, but Terex then received a $3.4 billion non-binding cash bid from China’s Zoomlion.
Konecranes said on Wednesday that all the proposed 32 million euro ($36 million) tax and financing synergies of the deal could be eliminated because of new proposals by U.S. regulators.
The companies have estimated the deal would in addition offer annual operational synergies of 110 million euros.
Konecranes-Terex was intended to be registered in Finland for tax reasons.
“The impact (of the tax synergy elimination) is significant, so this is yet another factor that speaks on behalf of Terex turning to Zoomlion,” said analyst Elina Riutta from Evli brokerage which has a ‘reduce’ rating on Konecranes stock.
“I would expect that Terex will eventually choose to merge with Zoomlion. Comparing Zoomlion’s cash offer to the expected synergies with Konecranes, I think it would be difficult for Terex to turn down Zoomlion.”
Konecranes CEO Panu Routila however said the companies continue to pursue the merger, adding that Terex’s board has not changed its recommendation in support of the deal despite its review of Zoomlion’s offer.
“For us, operational synergies have been the main thing... It seems that for Terex, (tax and financial synergies) are more important (than for us),” Routila told Reuters.
Konecranes shares were down 5 percent by 1102 GMT following the merger update and a weaker than expected quarterly report.
First-quarter order intake fell 18 percent from a year ago to 425 million euros, missing analysts’ expectation of 475 million in Reuters poll, as customers have turned cautious amid cooling global growth.
Konecranes has looked to the merger with Terex to help it cope with cooling Chinese and weak European demand, and analyst riutta said the merger would help it to cut overcapacity.
“Zoomlion-Terex, instead, would pose a bigger competition challenge for Konecranes in Europe and the United States,” she said, adding U.S. authorities could block Zoomlion’s acquisition of Terex. (Editing by Ruth Pitchford)