Shandong Heavy invests $922m in PE-backed Kion
Weichai Power, a Chinese automotive and equipment manufacturer owned by Shandong Heavy Industry, will invest EUR738 million ($922 million) in Kion, the German forklift truckmaker backed by KKR and Goldman Sachs. It is the largest Chinese direct investment in Germany to date.
The investment will be separated into two parts: EUR467 million to acquire a 25% stake in Kion via a capital increase, and the remaining EUR271 million for a 70% interest in Kion's hydraulics business. Weichai Power has the option to increase its stake in Kion to 30% in the event of an IPO.
According to market sources, Shandong Heavy's purchase will help alleviate a large round of debt refinancing due next year. Xuguang Tan, CEO of Weichai Power, said in a statement that the partnership would accelerate Weichai's five-year strategy to expand into new markets.
KKR and Goldman bought Kion in 2006 from German group Linde, reportedly placing an enterprise valuation on the company of around EUR4 billion - EUR2.6 billion in debt, EUR300 million in pension liabilities and another EUR1 billion in equity. The private equity investors put up a further EUR100 million in 2009.
"Today's investment is a huge step forward in this endeavour as our partnership with Weichai Power provides an outstanding basis from which to further develop Kion's growth strategy," Johannes Huth, head of KKR Europe, and Alexander Dibelius, head of Goldman Sachs Germany, Austria and Central and Eastern Europe, said in a joint statement.
The pair will retain their existing investments in the company without receiving any proceeds after this transaction, which is expected to close in the final quarter of 2012.
Kion comprises six brands - Linde, STILL, Fenwick, OM STILL, Baoli and Voltas - and is Europe's market leader in industrial trucks and the largest foreign manufacturer of forklift trucks in China. The German company employs 22,000 people and recorded sales of EUR4.4 billion last year and earnings of EUR365 million.
Weichai's investment comes after Sany Heavy Industry, a Chinese construction-equipment maker, and CITIC Private Equity announced in January that they would invest EUR360 million in Putzmeister, a German manufacturer of high-tech concrete pumps.
Last month, Sino-European private equity firm Mandarin Capital Partners also told AVCJ it is nearing a EUR500 million first close for its EUR1 billion second fund. The vehicle will target advanced manufacturing and services companies across China and German-speaking parts of Europe.
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