Terex Corp., a U.S. maker of cranes and construction machinery, agreed to combine with Finnish competitor Konecranes Oyj to create a crane and materials- handling supplier with a combined $10 billion in sales and greater global reach.

Terex stockholders will receive 0.8 of a Konecranes share for each of their shares, the companies said in statements Tuesday. That values Terex stock at about $30.19, based on Monday’s closing price for Konecranes, or 38 percent above where Terex shares finished the day.

The combination creates a “more diverse company that will be in an excellent position to succeed in a dynamic and highly competitive global industry,” Terex Chief Executive Officer Ron DeFeo, who will hold the same position at the new company, said in the statement.

The alliance is a response to a slowdown in demand for lifting gear and heightened competition from Chinese manufacturers, which have increased capacity and are looking further afield for contracts amid the prospect of a slowing domestic market. The companies have highlighted $121 million in annual savings as they combine their operations.

The companies described the transaction as a merger of equals. Terex stockholders will own 60 percent of the combined business, which will be incorporated in Finland and called Konecranes TerexPlc. Terex will nominate five directors on the nine-member board, with Konecranes choosing four. Konecranes Chairman Stig Gunnar Gustavson will have the same position after the merger.

Terex already played an active role in consolidation in the industry when it bought Demag Cranes AG of Germany in 2011. It had to raise its offer to win over management of Demag, which also attracted an approach from Konecranes. Other suppliers of material-handling gear for construction, mining, shipping and refining include Palfinger AG of Austria and Kion Group of Germany

Konecranes jumped 23 percent to 34.44 euros as of 12 p.m. in Helsinki, giving the company a market value of 2.18 billion euros ($2.4 billion). Terex shares have declined 22 percent this year, leaving the Westport, Connecticut-based company valued at $2.37 billion. The stock climbed as much as 14 percent in after- hours trading to $24.95 after Bloomberg News reported the companies were in talks on a combination.

 

Europe Focus

 

“A combination of Terex and Konecranes would likely focus on manufacturing synergies,” Kwame Webb, a Chicago-based analyst at Morningstar Inc., said Monday by phone before the transaction was announced. “It would be a play on costs since they both manufacture in Europe.”

Konecranes, which serves manufacturing and process industries, shipyards, ports and terminals, signaled on July 17 it’s premature to call a recovery in European markets and said North America had seen some sluggishness. Volumes in China in the second quarter were quite low amid uncertainties surrounding the economy, and new lower-cost products are being developed to address “really tough” price pressure, it said.

The Finnish company had revenue of about 2 billion euros, compared with Terex’s $7.3 billion, and about 12,000 employees in almost 50 countries, according to its website. Last month, it hired Panu Routila as CEO, replacing Pekka Lundmark, who is leaving to join utility firm Fortum Oyj after 10 years at the helm of the crane maker. Routila will join the company soon and serve as CEO until the deal is completed in the first half of 2016, he said in an interview.

Credit Suisse advised Terex on the deal, with Fried, Frank, Harris, Shriver & Jacobson LLP, Bryan Cave LLP and Avance Attorneys Ltd. providing legal counsel. Perella Weinberg Partners advised Konecranes, which got legal advice from Skadden, Arps, Slate, Meagher & Flom LLP and Roschier, Attorneys Ltd.

 

--With assistance from Raine Tiessalo in Helsinki.