Baird Upgrades Terex, Sets $30 Price Target

Terex Corporation TEX announced it has entered into an agreement to sell MHPS to Konecranes for cash worth $820 million and 19.6 million newly issues shares of Konecranes.

Baird’s Mircea (Mig) Dobre on Tuesday upgraded the rating on Terex to Outperform, while raising the price target from $24 to $30.

“The sale of MHPS to Konecranes is a positive catalyst on multiple fronts: shareholders got an attractive multiple for what historically has been a challenged business with further upside possible,” Dobre mentioned.

The sales also reduces execution risk, given that now the new CEO can focus better on operational improvement, without the need to integrate the Terex and Konecranes businesses.

“Terex is receiving ~$1.36 billion for a business that has proved very challenging since the Demag acquisition in 2011,” the analyst stated.

A Zoomlion Offer Likely

Dobre also pointed out that the sale of MHPS increases the probability of Zoomlion making a firm offer.

“Terex management has left the door open for two weeks for Zoomlion to present a fully financed offer for the entire company (including MHPS) before the MHPS sale to Konecranes becomes contractually binding,” according to the Baird report.

Dobre believes a Zoomlion deal would now be easier, given that the remainder of Terex’s businesses are a better fit with Zoomlion’s existing product portfolio and that the “funding hurdle” to the acquisition has been lowered due to the attractive terms of the sale of MHPS.