May 17 - Terex Corporation has agreed with Konecranes to terminate its original merger plans and instead sell its material handling and port solutions (MHPS) business to the Finnish company for USD1.3 billion.

The two parties have cancelled their original agreement, which would have involved an all-share merger of equals.

This latest development comes after the merger discussions were put on hold following an alternative offer from Chinese manufacturer Zoomlion to acquire all of Terex's outstanding shares.

The new transaction will see Terex divest its MHPS business to Konecranes but maintain a 25 percent shareholding in the business. Terex will also have the right to nominate two directors.

Expected to close in January 2017, the transaction is subject to customary regulatory approvals and the approval of Konecranes' shareholders.

Terex states that the new agreement provides it with the ability to continue its discussions with Zoomlion. The US based manufacturer said in a statement that it has the right to terminate the Konecranes agreement on or before May 31, 2016 for a fee of USD37 million if it comes to an agreement with Zoomlion on the sale of the company as a whole.

Terex president and ceo John L. Garrison said that the Konecranes transaction is good for its customers, staff and shareholders, as it will reduce the manufacturer's debt levels, improve its balance sheet and give the company long-term financial flexibility.

"Importantly, the transaction locks in the benefits of the MHPS sale while preserving the ability for Terex to continue discussions with Zoomlion on a potential sale of the company at USD31 per share with the MHPS business or, alternatively, for the sale of Terex without the MHPS business," added Garrison.