After agreeing to talks following the board’s rejection of Terex’s first bid for the company at €41.75 per share, Demag AG’s management and supervisory boards will recommend an improved share price offer of €45.50, a 53% increase on the firm’s last quoted share price before speculation over the merger.

A Business Combination Agreement signed by both parties yesterday agrees Demag AG will have independent operating segment status within Terex, and will retain responsibility for all strategic and operational planning, including research and development.

Demag Cranes’ CEO Aloysius Rauen will represent the firm as part of Terex’s executive leadership team.

The Business Combination Agreement also guarantees that until a Domination Agreement comes into effect in the event of a majority shareholding, Demag AG will maintain full financial autonomy.

Other provisos in the agreement will safeguard existing Demag AG employees against forced redundancies for a period of three years, and comply with existing employee rights.

Demag AG’s headquarters will remain in Düsseldorf, and along with other existing German sites, in Wetter, Uslar and Luisenthal, will receive a site preservation guarantee for five years.

Terex CEO and chairman Ron DeFeo said: “We are pleased to have reached an agreement with the management of Demag Cranes that provides an excellent basis for the future joint success of Terex and Demag Cranes. Our businesses are highly complementary and the combination has compelling industrial logic for all of our collective stakeholders.

“Demag Cranes products are competitive and innovative. The company is professionally managed, with highly motivated staff, and Terex will draw on this for both Demag Crane’s ongoing success and the future of Terex as a whole.

“We look forward to capitalising upon our strengths and working with Demag Cranes’ management and employees to continue to grow the business globally.”

Demag AG’s strategic autonomy will allow them to continue it’s expansion into the Chinese crane market through the strategic partnership formed with Chinese crane manufacturer Weihua Group earlier this year, with the full backing of Terex.

Demag AG CEO Aloysius Rauen commented: “As part of the Terex Group, Demag Cranes will be able to further pursue its clear and successful growth strategy in the integrated structures we have built.

“We will profit from access to international markets as well as the Terex Group’s network. Therefore, the transaction Terex intends to undertake will create value for all of our stakeholders.”

Demag AG shareholders will have until 30th June to decide whether or not to accept the revised offer, which will see the Demag and Gottwald brands remain intact.