On August 20, Zoomlion Heavy Industry Science & Technology Co., Ltd. and Hony Capital, together with Chery Detank Heavy Industry Science & Technology Co., Ltd., jointly announced that Zoomlion had acquired a 60% stake (1.8 billion shares) in Chery Detank for RMB 2.088 billion and Hony Capital had acquired a 20 % stake (600 million shares) for RMB 696 million.
The acquisition marks Zoomlion's official strategic expansion into the area of agricultural machinery. Zoomlion stated that the acquisition will help the company to quickly become a leading agricultural machinery enterprise in China and that it heralds a change in the composition of China's agricultural machinery industry as Zoomlion looks to help agricultural machinery climb the global value chain.
Zoomlion's Shifting Focus
Zoomlion stated, "This is a strategic acquisition." It also commented that the agricultural machinery industry has strong potential for development and is one of Zoomlion's five major business segments.
Agricultural machinery is a major part of the strategic transformation of Zoomlion and the epoch-making choice by Zoomlion Chairman Mr. Zhan Chunxin and his team to compensate for risk brought about by industry cycles by decisively shifting the company's development focus from construction machinery to five major business segments, namely construction machinery, agricultural machinery, the environmental industry, heavy-duty trucks and financial services.
"This powerful partnership with Chery Detank marks the realization of Zoomlion's development strategy to move into the agricultural machinery sector," said a Zoomlion representative.
"This merger will become another milestone in the company's entry into agricultural machinery. It will help it to quickly become a leading agricultural machinery enterprise and achieve restructuring and industrial upgrading, so that agricultural machinery follows on from engineering machinery and the environmental industry as a new profit growth point and business bright spot."
As for selecting agricultural machinery to transform and upgrade the company, Zoomlion has stated that food has always been one of China's most important concerns: "As a national responsibility, there is a need to move it forward, and because of the potential market, there are gains to be made." Looking at the development prospects of the agricultural machinery industry, Zoomlion points out that China is a large agricultural country and the its modernization depends on agricultural modernization, which itself depends on the modernization of agricultural machinery. This means there is huge potential demand for agricultural machinery.
This highlights the company's determination and confidence to move into agricultural machinery.
Teaming Up with a Strong Brand to Achieve a Breakthrough in the Industry
Of the decision to team up with Chery Detank, Zoomlion said at the press conference that the reason the acquisition was successful was first of all thanks to choosing a good location and a good partner.
Chery Detank is a leading Chinese agricultural machinery enterprise with the widest product range in China. The company develops and manufactures a complete range of agricultural machinery for plowing, planting, harvesting and drying. Chery Detank has been granted 434 patents, including 23 patents of invention, and many products are authorized to use e-mark, CE, GOST and other certification marks.
Zoomlion is the world's leading construction machinery enterprise with strengths and resources in the areas of technology, marketing, management and cultural awareness accumulated over 22 years of hard work. It is particularly worth noting that, since 2001, Zoomlion has acquired British company Powermole, Pu Yuan Group, Shaanxi Huang Gong Co., Ltd., CIFA of Italy, m-tec of Germany, Raxtar of the Netherlands and a number of other enterprises, which has greatly enhanced Zoomlion's product structure and allowed it to make the leap from a leader in China to an international leader and stand at the forefront of Chinese manufacturing.
The other player involved in this merger, Hony Capital, is a top private equity company with a wealth of experience and resources in the areas of capital operations, value discovery, corporate governance and international strategy. A representative from Hony Capital said, "In the process of advacning the deal, Hony Capital agreed with the parties involved that we will bring to bear our expertise as a strategic financial investor and use our experience in developing strategies, merger integrations, capital operations, optimal management and other aspects to provide value-added services to the company and provide guidance and advice to help integrate resources and aid continued business development."
Hony Capital's representative went on to say, "By creating a cooperation and development model and accelerating the upgrading of the company's technology, marketing, management and capital capacity, we will improve its market competitiveness and internationalization." Zoomlion explained that it will utilize the advantages it has accumulated in construction machinery and capital operations in the area of agricultural machinery, which will bolster Chery Detank, promote the sustained and healthy development of China's agricultural machinery industry, accelerate agricultural modernization, help Chinese agricultural machinery to quickly climb the global value chain, and raise the banner of homegrown brands in the Chinese agricultural machinery industry.
