As the largest shareholder of Bucyrus (NASDAQ:BUCY), Terex (NYSE:TEX) is a big beneficiary of the buyout of BUCY by Caterpillar (NYSE:CAT). TEX owns 5.8M shares now worth over $500M. Not only do they get the appreciation from the 30% gain today, but more importantly TEX gets to cash out their shares that they acquired via the sale of their mining division to BUCY at a premium. Having the $500M in cash on hand is a lot more valuable to them then stock in BUCY.
TEX provides one of the best stock picks for the global rebound. At $25, TEX provides one of the few remaining stocks that hasn't rebounded. The stock still remains roughly 75% below 2008 highs while some stocks have already eclipsed those highs ala BUCY. The crane industry is still struggling to recover from the financial crisis, but signs are emerging that 2011 will the recovery year and TEX likely plays catchup with the market.
TEX now enters the recovery phase of its business cycle with a rock solid balance sheet. After the close of the CAT deal, TEX will have $1.8B in cash to either pay down debt or use for a strategic acquisition. Either way, while the market is enamored with mining equipment makers it appears that TEX management has the used the opportunity to sell those assets for premium prices and can now use that cash to shore up it's more focused business lines.
From a technical standpoint, TEX has broken above the October highs of $25 and will likely challenge the April highs at $28 near term.
Disclosure: Long TEX, CAT