SALE OF MHPS BUSINESS AND INVESTMENT CARRIED AT FAIR VALUE

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

SALE OF MHPS BUSINESS AND INVESTMENT CARRIED AT FAIR VALUE

SALE OF MHPS BUSINESS AND INVESTMENT CARRIED AT FAIR VALUE

On May 16, 2016, Terex agreed to sell its Material Handling and Port Solutions (“MHPS”) business to Konecranes Plc, a Finnish public company limited by shares, (“Konecranes”) by entering into a Stock and Asset Purchase Agreement, as amended (the “SAPA”), with Konecranes. As a result, the Company and Konecranes terminated the Business Combination Agreement and Plan of Merger (the “BCA”) announced on August 11, 2015, with no penalties incurred by either party. On January 4, 2017, the Company completed the disposition of its MHPS business to Konecranes (the “Disposition”), pursuant to the SAPA, effective as of January 1, 2017. In connection with the Disposition, the Company received 19.6 million newly issued Class B shares of Konecranes and approximately $835 million in cash after adjustments for estimated cash, debt and net working capital at closing and the divestiture of Konecranes’ Stahl Crane Systems business (“Stahl”), which was undertaken by Konecranes in connection with the Disposition. The final transaction consideration was subject to post-closing adjustments for the actual cash, debt and net working capital at closing, the 2016 performance of the MHPS business and Konecranes business, and the closing of the sale of Stahl. During the three and nine months endedSeptember 30, 2017, the Company recognized a gain on the Disposition (net of tax) of $2.6 million and $60.7 million, respectively.

The Company and Konecranes entered into a Stockholders Agreement, dated as of January 4, 2017, which provided certain customary restrictions and obligations. Terex also had customary registration rights pursuant to a registration rights agreement between Terex and Konecranes entered into on January 4, 2017.

The Company sold all shares received in connection with the Disposition in three tranches. During the three and nine months endedSeptember 30, 2017, the Company sold 5.2 million and 19.6 million Konecranes shares for proceeds of approximately $221 million and $770 million, respectively. During the three and nine months endedSeptember 30, 2017, the Company recorded a net gain on sale, including the effects of foreign exchange rate changes, of $3.4 million and $42.0 million. The net gain on these sales is recorded as a component of Other income (expense) - net in the Condensed Consolidated Statement of Comprehensive Income (Loss).

On March 23, 2017, Konecranes declared a dividend of €1.05 per share to holders of record as of March 27, 2017, which was paid on April 4, 2017. During the nine months endedSeptember 30, 2017, the Company recognized dividend income of $13.5 million as a component of Other income (expense) - net in the Condensed Consolidated Statement of Comprehensive Income (Loss).

In connection with the Disposition, the Company and Konecranes entered into certain ancillary agreements, including Transition Services Agreements (“TSA’s”) generally with terms from three to twelve months, dated as of January 4, 2017, under which the parties provide one another certain transition services to facilitate both the separation of the MHPS business from the businesses retained by the Company and the interim operations of the MHPS business acquired by Konecranes. Cash inflows and outflows related to these TSA’s generally offset to immaterial amounts.

Loss Contract

Related to the Disposition, the Company and Konecranes entered into an agreement for Konecranes to manufacture certain crane products on behalf of the Company for a period of 12 months. The Company recorded an expense of $6.3 million related to losses expected to be incurred over the agreement’s life during the nine months endedSeptember 30, 2017. The agreement was amended on October 11, 2017 to extend the period of manufacturing for an additional 24 months.

SAPA and BCA Related Expenses

Terex incurred transaction costs directly related to the SAPA of $1.3 million and $2.5 million for the three and nine months endedSeptember 30, 2016, respectively, which amounts are recorded in Income (loss) from discontinued operations - net of tax in the Condensed Consolidated Statement of Comprehensive Income (Loss).

Terex incurred transaction costs directly related to the terminated BCA of $0.2 million and $12.8 million for the three and nine months endedSeptember 30, 2016, respectively, which amounts are recorded in Other income (expense) - net in the Condensed Consolidated Statement of Comprehensive Income (Loss).