Elliott, others sue Terex for higher Demag payout -sources

FRANKFURT Tue Oct 23, 2012 7:18am EDT

FRANKFURT Oct 23 (Reuters) - More than 100 shareholders in Demag Cranes including hedge fund Elliott International are suing Terex for a higher payout after its $1.4 billion takeover of the German crane maker, two people familiar with the situation said.

Elliott and the other minority shareholders hope that Terex will be forced to pay up an extra 200 million euros ($261 million) in the best case scenario, these people said on Tuesday.

German takeover law requires buyers who achieve a 75 percent threshold to offer remaining shareholders compensation based on a company valuation rather than the original offer price.

Terex made a takeover offer for Demag in May 2011 and after sweetening its bid to 45.50 euros ($59.47) a share acquired 82 percent of Demag's shares by September 2011.

Judges deciding similar cases in Germany have tended to set compensation at a level between the original offer and the amount demanded by other shareholders.

Terex has offered remaining shareholders 45.52 euros a share, while the activist investors are demanding more than 100 euros a share.

"The truth usually lies somewhere in the middle", one of the people said.

A spokesman for the District Court Duesseldorf - the city where Demag is also based - said that a complaint has been filed by Demag investors, declining to elaborate.

A Terex spokesman said that the company understood shareholders' rights to petition for a different valuation.

"But we are comfortable that our offer reflects a fair value for the shares," he added.

Investors have sometimes been successful in their push for a higher compensation. This year, courts upped the payment to minority shareholders of utility Mainova by 41 percent and to investors in HVB Real Estate Bank by 22 percent.

According to the sources close to the matter, Elliott argues that after the takeover by Terex and following several management changes, Demag reduced its growth plans and came up with an artificially low company value.

Elliott, which currently holds 12.7 percent in Demag Cranes' shares making it the only shareholder with a stake of more than 3 percent besides Terex, declined to comment, as did Demag Cranes.

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