Finnish cargo manufacturer Cargotec and engineering firm Konecranes plan to merge after a decision taken by their respective boards of directors
The future company will operate in container handling, manufacturing, transportation, construction and engineering, marine industries, paper and pulp, metals productions, mining, power and chemical industries.
The merged entity reportedly will look to develop more automated and environmentally friendly cargo handling technologies.
The combination of the two businesses is expected to create a dominant name in the cargo handling segment. In 2019, combined sales between Cargotec and Konecranes totalled €7Bn (US$8.2Bn) while the operating profit would have stood at approximately €565M (US$662M) based on the 2019 fiscal year.
Konecranes said the new company is aiming for a comparable operating profit margin of more than 10% and expects annual cost savings of about €100M (US$117M) within three years of the completion of the deal.
Following the plan, Konecranes would be folded into Cargotec in a merger of equals. Cargotec will issue new shares without payment to the shareholders of Cargotec in proportion to their existing shareholding by issuing two new class A shares for each class A share and two new class B shares for each class B share.
Konecranes’ shareholders will receive 0.3611 new class A shares and 2.0834 new class B shares in Cargotec for each Konecranes share they hold. This will result in Konecranes shareholders owning approximately 50% of the shares and votes of the future company.
Shareholders representing 76.3% of Cargotec votes and 27.4% of Konecranes votes have irrevocably committed to back the deal.
Cargotec’s chairman and largest shareowner Ilkka Herlin is part of Finland’s wealthiest family, who divested Konecranes from liftmaker Kone in 1994.
Konecranes CEO, Rob Smith said“The Future Company will be a global leader with its unparalleled product range, global service network, industry-leading intelligent technology and an unwavering commitment to safety. Supporting this will be top talent from both Konecranes and Cargotec and a passion to lead in sustainable material flow to deliver the very best for our customers. The timing is right, and the logic and fit of this combination are compelling. Konecranes looks forward to starting this journey together with Cargotec.”
Cargotec CEO Mika Vehviläinen said “Together we are stronger and our combined R&D resources will enable us to accelerate innovation in automation, robotics, electrification and digitalization. Both companies have broad service networks and together we can offer our customers superior value through our world-class service platform and intelligent technology.”
The merged entity will include an equal number of board members from each company and will be chaired by Konecarnes’ chairman Christoph Vitzthum. A new chief executive is yet to be named. The merger is pending regulatory approval and the future company’s name will be determined and announced at a later stage.