China Development Bank to provide financing for PE, Weichai-backed Kion
China Development Bank will provide EUR500 million ($647 million) in financing to support the partnership between Weichai Power, a Chinese automotive and equipment manufacturer, and Kion, a German forklift truck maker backed by KKR and Goldman Sachs. Last year, Weichai bought a 25% stake in Kion for EUR738 million, the largest Chinese direct investment in Germany to date.
The financing agreement was signed in the presence of German Chancellor Angela Merkel and Chinese Premier Li Keqiang. Kion CEO Gordon Riske said in a statement that the expansion of partnership with Weichai would support the company's plans to expand in Asian markets.
Weichai, which is owned by Shandong Heavy Industry, paid EUR467 million for its 25% holding in Kion via a capital increase and then another EUR271 million for a 70% interest in the Germany company's hydraulics business. Should Kion go public, Weichai has a call option to raise its stake to 30%, plus a further option to buy an additional 3.3% in the company from KKR and Goldman.
The two PE investors 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. They put up a further EUR100 million in 2009.
Kion's hydraulics business, which now operates independently of its parent, is particularly important to Weichai because the hydraulic machinery industry in China is entirely import-oriented. The lack of domestic expertise is seen as a significant obstacle to the development of the broader manufacturing sector.
"It was important for both parties to enter into a cooperation with a strong underlying strategic, and not just a financial, rationale," Silke Scheiber, a partner at KKR, told AVCJ earlier this year. "One interest in the strategic partnership with Kion was to get access to a very high quality hydraulic component business which is important to enhance the product portfolio, and there must be an advantage that they see from Kion's products."
Other industrial manufacturing investments by Chinese companies in Germany include Sany Heavy Industry's EUR360 million acquisition of Putzmeister, a high-tech concrete pumps maker. CITIC Private Equity also participated in the transaction.
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