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| Will Terex-Zoomlion deal a possible national security issue ? Duncan Hunter raise concerns. |
U.S. Congressman, Duncan Hunter has raised concerns about a possible Zoomlion-Terex deal in a letter to U.S. Treasury Secretary Jacob Lew, citing that the Chinese company’s long time association with China People’s Liberation Army.
“The fact that a leading PLA supplier is seeking to purchase an American company that provides critical infrastructure equipment to a number of government agencies … demands that the agreement undergo thorough scrutiny,” Hunter said.
Terex shares rose as much as 8% to $22.08 on Wednesday. But they stayed well below Zoomlion’s offer of $30 – a price the stock has not hit since November 2014. It also an indication that investors do not expect the deal to go through.
Both Zoomlion and Konecranes have bid for Terex with the same reason – better cope Chinese and weak European demand.
Reuters reported in January that a Zoomlion-Terex deal could be blocked by the Committee on Foreign Investment in the United States (CFUIS). However, Zoomlion was confident they would get regulatory approval for the deal.
Terex has 97 so-called priority-rated contracts with the U.S government that could attract CFIUS scrutiny. It also provides mobile cranes in ports that are seen as a critical part of U.S. infrastructure.
CFIUS Review
A formal CFIUS review of Zoomlion’s acquisition of Terex would likely to take up to 75 days, according to people familiar with the matter. Terex has not informed Zoomlion how long it will take to make a decision on its latest proposal.
While Terex disclosed Zoomlion’s approach on 26 January 2016, Zoomlion first reached out to Terex to express interest at the start of the fourth quarter of 2016 and made its latest offer on 4 December 2015, according to the sources. Zoomlion does not plan to go hostile with its bid for Terex should it be rebuffed.
The financing commitments Zoomlion has received for the transaction are valid for the entirety of the potential CFIUS review, until the deal closes, and include commitments from Chinese banks, according to sources.
While U.S are raising concerns on national security issues, Province of Human and Hony Capital, which together with management own about 30% of Zoomlion’s shares, both supported the Terex transaction.
Other Deal Fallen Due to National Security
There was a number of offers from Chinese companies to buy or invest in U.S companies which have fallen through due to concerns about national security.
Fairchild Semiconductor International Inc on Tuesday rejected an offer from China Resources Microelectronics Ltd and Hua Capital Management Co Ltd on concerns that U.S regulators would reject the deal.
References
- China’s Zoomlion bids for Terex, stokes U.S. national security fears, Reuters, 17 February 2016.
- Terex stops Konecranes merger integration work, Channel News Asia, 20 February 2016.
