A Great Move - Weichai Power Speeds Up Global Strategy

Signing ceremony of Weichai Power and KION 

As another milestone investment following successful acquisition of Moteurs Baudouin SA (a 130-year old French company) in December 2008 and Italian Ferretti Yachts Group in January 2012, this investment also boasts as the hugest direct investment of Chinese enterprises in Germany as well. 

Under the terms of the agreement, total investment of Weichai Power will amount to 738 million euro, 467 million euro of which will be used to acquire 25% shares of KION by the way of capital increase, and the remaining 271 million euro will be used to acquire the majority shares (70%) of Linde Hydraulics under KION Group. KION Group will take this chance to further optimize its capital structure. Goldman Sachs and KKR & Co., L.P. will continue to fully support KION, keeping all of their investment in KION and not taking any cashes from this trading. In case KION issues IPOs in the future, Weichai Power is entitled to increase its KION shares to 30% and further increase its KION hydraulic business 

Signing ceremony of Weichai Power and KION 

Upon accomplishment of the trading, Linde Hydraulics will run hydraulic business independently, while KION will keep its strategic shares in this corporation. Hydraulic products of Linde will continue to use Linde Hydraulics as the trademark. Cooperation with Weichai Power will facilitate Linde Hydraulics to expand, adapt to the ever changing market, and confront with the more and more fierce competition in a better way. At the same time, by taking advantage of complementary products and technologies of the two parties, Linde Hydraulic will be able to draw on untapped potential to explore new market, especially the booming Asian market. Among its business plans, Linde Hydraulics is to transfer the existing hydraulic businesses in Nilkheim, Aschaffenburg to a neighboring new factory and increase capacity of other hydraulic product manufacturing factories. 

Only those who make the best hydraulics could be most competitive.  The hydraulic control system is viewed as the largest obstacle to the development of equipment manufacturing industry in China. At present, high-end hydraulic products are wholly import-dependent, with the value of imports approaching 30 billion yuan in 2011.Hydraulic markets all over the world have been monopolized by Boschrexroth (German), EATON (USA) and Kawasaki (Japan) for a long time, thus this strategic cooperation will sure make significant changes in the structure of global hydraulic manufacturing industry.  

The strategic cooperation between Weichai Power Co., Ltd. and KION GROUP can: (I) help Weichai Power Co., Ltd. rapidly master the world-leading high-end hydraulic technology. The adaptive cooperation in development brings about all-around breakthroughs in engineering machinery, agricultural machinery, yacht, astronavigation and other fields, directly upgrades the core technology of Weichai Power Co., Ltd. to the world-leading level, and rapidly seizes the commanding point of the hydraulic industry. As a result, the situation of China’s long-time dependence on import for high-end hydraulic products is thoroughly changed; (II) help to build Shandong Province as the industrial base of high-end hydraulics in China, and strive to establish the hydraulic system manufacturing center in China and even around the world. Depending on the existing resource advantages of Weichai Power Co., Ltd., via technology import, digestive absorption and independent innovation, the medium/high-end hydraulics research, development and manufacturing base, leading in the whole series, field and world, is established; (III) promote the industrial restructuring and upgrading of engineering machinery in China. The 12th Five-year Plan for the high-end equipment manufacturing industry clearly points out that emphasis shall be laid on development of hydraulic products, and based on the restructuring and reinvigoration planning for equipment manufacturing industry, great efforts shall be made to develop the hydraulics pneumatics & seals industry. Linde Hydraulics, the rare strategic resources in the global high-end hydraulics market at present, is considered as the golden opportunity for our enterprises to involve in the high-end hydraulics manufacturing industry. The merger of Linde Hydraulics combines the world-leading HP hydraulic technology with the low-cost manufacturing in China to completely change the long-term situation of the high-end hydraulic core technology being monopolized by foreign enterprises, drive our engineering machinery industry move to the value chain of high-end, and indeed realize the transformation from Made in China to Created in China; (IV) give Weichai Power Co., Ltd. assistance in fully implementing the supporting strategies for the low-power diesel of KION GROUP; (V) 25% equity investment in KION GROUP achieves the collaboration with Forklift businesses of Shandong Heavy Industry, improves its level in terms of technology, quality and process, and guides to realize Asia-Pacific market strategies.  

“This cooperation is an important step for our global strategy, new market exploration and strategic plan of new product business in the next five years. With the investment, we will make the best of the powerful status of KION Group to help both of us grasp new growth opportunities and further enhance our respective advantages in competition.” Tan Xuguang, Chairman of Weichai Power, told the journalist.

“This cooperation affirms KION’s advantage as an international brand and our commitment in customer service. Cooperation with Weichai Power will further consolidate our business relations. Both of us are strongly complementary in terms of products, regional market position and technologies. Establishment of this strategic partnership adds important driving force to KION’s future strong growth, especially in China and other Asian markets. Both industrial forklifts and hydraulics business will greatly benefit from specialized technologies of Weichai Power in engine and driving technology fields.” said CEO of KION, Gordon Riske.

Johannes Huth, a board member and principal of KKR (Europe), and Alexander Dibelius, CEO of Goldman Sachs in Germany, Austria and Middle East emphasized that “Weichai Power is welcomed to become a stockholder of KION Group. Since our first cooperation with KION in 2006, we, together with KION’s team, have been committing ourselves to make KION a real global company. This investment marks a big step for that. The cooperation with Weichai Power lays solid foundation for continued implementation of KION’s growth strategy.”

Weichai Power and KION Group are now consulting with each other on future cooperation in other several fields such as components and auxiliaries. It is learned that annual capacity of KION’s forklifts will be 250,000 in future five years and auxiliaries for related products such as engines of Weichai Power will be further stimulated. With respect to material handling, Weichai Power’s hydraulic department will sign a long-term procurement and supply agreement with the forklift department of Linde, a subsidiary brand of KION Group.

Profile of KION Group GmbH

KION Group GmbH, with six brands: Linde, STILL, Fenwick, OM STILL, Baoli and Voltas, is the industrial forklift market leader in Europe, the world's second largest industrial forklift manufacturer and also a leading multinational supplier in China. Linde and STILL brands service global high-end markets. Fenwick is the largest supply brand of material handling products in France, and OM STILL is the leader on the Italian market. Baoli brand is the flagship of economic markets and Voltas is one of India's top two market leading brands. The KION Group GmbH had about 22,000 employees in 2011, with operating income of approximately 4.4 billion euros.