Weichai Finalizes Acquisition of Linde Hydraulics

Posted on December 29, 2012

China’s Weichai Power Co., Ltd., KION Holding 1 GmbH and their respective subsidiaries have announced the successful closed of their previously announced strategic partnership.

Weichai Power, and part of the Shandong Heavy Industry Group (SHIG), and KION Group, a manufacturer of industrial trucks, intend to strengthen their industrial base in the European markets, create additional opportunities for expansion for their Asia-Pacific businesses and build a platform for future joint growth.

Weichai Power, through its Luxembourg based subsidiary Weichai Power Holding S.a.r.l., have acquired a 25% stake in KION by way of a capital increase, making it an anchor investor in KION Group along with KKR and Goldman Sachs Capital Partners.

In addition, Weichai Power now holds a 70% majority stake in Linde Hydraulics GmbH & Co. KG, the former hydraulics business activities of Linde Material Handling GmbH. The remaining 30% continue to be held by Linde Material Handling GmbH.

An existing call option allows Weichai Power to increase its shareholding in KION to 30% on a fully diluted basis upon the completion of a potential future IPO, the parties agreed to grant Weichai Power a further option to acquire an additional 3.3% stake in KION from the current shareholders until June 30, 2013 or within three months after completion of a potential future IPO. If Weichai holds at least 33.3% of KION, the parties will support the election of a Weichai Power representative to Chairman of the supervisory board of KION.

Following the successful carve-out, the hydraulics business of Linde is now being operated and managed by the independent company. Linde Hydraulics continues to market its products under the Linde trademark. The existing strategic sales agreement between Linde Hydraulics and Eaton Corp., which has been amended, remains in place.

Through its partnership with Weichai Power, Linde Hydraulics will gain additional scale and will improve its ability to adapt in a changing market environment and amid increasingly intensive competition, the company’s said in announcing the deal. Linde Hydraulics will leverage Weichai Power's complementary products and technologies in an effort to exploit untapped market potential, particularly in the growing Asia region.

Weichai Power has invested a total of €738 million, including €467 million paid in to acquire its 25% stake in KION through a capital increase and €271 million paid to Linde Material Handling GmbH for its 70% majority stake in Linde Hydraulics.

Tan Xuguang, chairman and CEO of Weichai Power, said: "We will now make an immediate start to implementing our common growth strategy in the area of hydraulics. The new Aschaffenburg-based Linde Hydraulics plant is set to start operations in 2015. Also, teams from Linde Hydraulics and Weichai Power have already started to explore a wide range of applications for Linde Hydraulics technologies in Weichai Power products. Our options to increase our overall shareholding in KION up to 33.3% demonstrate our strong commitment to the common goals of KION Group and Weichai Power."

Gordon Riske, CEO of KION Group, said: "The closing of this long-term strategic partnership is a milestone in our strategy to continuously expand our forklift truck business in the growing Asian and Chinese markets. Moreover, the additional enhancement of our capital structure provides exciting opportunities with which we can build on our growth strategy."

The long-term strategic partnership between Weichai Power and KION Group will also be reflected in the governance structure of KION and Linde Hydraulics. Jiang Kui, president of Shandong Heavy Industry Group and director of Weichai Power, will join the supervisory board of KION, which will continue to be led by chairman John Feldmann..

The Supervisory Board of the newly established Linde Hydraulics will consist of Jiang Kui (chairman), Sun Shaojun and Jeffrey Chen, all of whom were nominated by Weichai Power, as well as Theodor Maurer, who was nominated by Linde Material Handling. The respective employee representatives have yet to be nominated.

Jorg Ulrich, speaker of the management board and head of finance and administration, Steffen Appel, head of operations, and Thorsten Van der Tuuk, head of products and markets, have been appointed to the management board of Linde Hydraulics.