Volvo Buys IR’s Roadbuilding Unit

Posted on February 27, 2007

In its second major acquisition announcement in as many weeks, Volvo said it has reached an agreement with Ingersoll Rand to acquire the assets of IR’s road development division, a manufacturer of heavy equipment for road construction and soil compaction. Purchase price is $1.3 billion in cash, which includes IR’s material handling equipment, along with 20 dealerships in North America and distribution companies in Europe and Russia. The sale is expected to close during the second quarter and is subject to relevant approvals.

Last week, Volvo announced a $1.07 billion bid to take over Japan's Nissan Diesel Motor Co. If approved by antitrust authorities, the deal would be completed by March 29, Volvo said.

”I am pleased that we can continue to expand our successful construction equipment business and the acquisition gives Volvo Construction Equipment a world-leading position within heavy road construction equipment,” said Volvo CEO Leif Johansson. “This acquisition is strategically important since it will improve the overall competitiveness of Volvo CE as a full-range supplier of construction equipment.”

Johansson said the acquisition would make Volvo the number three construction equipment manufacturer in the world behind Caterpillar and Komatsu. The company is already the second-largest truck manufacturer behind only DaimlerChrysler.

The global market for road construction equipment is about $4 billion annually and is projected to grow substantially as a result of increased investments in infrastructure globally, Volvo said. Volvo CE plans to expand in this market and the acquisition of IR’s business complements current operations. The acquired business, which accounted for revenues of $864 million in 2006, includes a full range of heavy compactors, asphalt pavers and milling machines and also strengthens Volvo CE’s position in the market for materials handling equipment in North America. Ingersoll Rand’s road development business is headquartered in Shippensburg, Pa., and has manufacturing units in the US, Germany, India and China.

”Strategically, the acquisition of Ingersoll Rand Road Development fits exceptionally well with Volvo’s current operations within motor graders and positions Volvo as a full-range manufacturer of heavy road construction equipment”, said Tony Helsham, president of Volvo Construction Equipment. ”Geographically, the purchase also fits Volvo CE very well and provides attractive growth possibilities by capitalizing on the common dealer network in North America, Europe and Asia.”