30.09.2013

Palfinger and Sany to expand partnership

Palfinger and Sany are each to acquire a 10 percent stake in the other company further expanding their joint venture partnership formed last year.
See Palfinger and Sany team up
Half of the 10 percent stake in Palfinger to be acquired by Sany (1,863,258 shares) will take the form of new shares issued to Sany by Palfinger. The other half of the stake is through the acquisition of existing shares from the Palfinger family. The price payable by Sany will be €29 a share.

As a result of the Palfinger family's willingness to support Sany’s participation by selling a portion of their ownership, and thus reducing their stake to around 57 percent, the agreement prevents the future issuing of new shares in Palfinger.

In return, Palfinger will acquire a 10 percent stake in Sany Lifting which includes all of the mobile, tower and crawler crane operations and is of a comparable size to Palfinger.

The interlinking of the two groups will presumably also be reflected in the supervisory boards of both organisations.
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Some of the first truck cranes under the Sany/Palfinger European Joint Venture arrive in Russia

Sany group president Xiang Wenbo said: “For Sany, the close cooperation with Palfinger represents a major step in the direction of the global market. Together we can develop the globalisation of Sany from a Chinese perspective. We are excited about the quick success of both joint ventures. The consolidation and expansion of our strategic partnership will make an important contribution to Sany’s further growth.”

Herbert Ortner, chief executive officer of Palfinger added: “This desired consolidation of our strategic partnership is the basis for the further expansion of our proven cooperation. Together we have achieved a great deal in one year, and we are extremely pleased with the success scored in the Chinese market. To Palfinger, this partnership with Sany is of great importance. Moreover, Sany Lifting is an attractive investment.”

Hubert Palfinger deputy chairman of the supervisory board of Palfinger said: “We support Sany’s participation and are happy to have a strong partner on board as the second largest shareholder. This mutual interaction will strengthen both groups. Working side by side with our Chinese partners is an enrichment at all levels, not just operationally in business, but also culturally and personally.”

Now that an agreement in principle has been reached, the final contracts will be drafted. The implementation of the transaction will thereafter be subject to Chinese regulatory approvals and approvals by the boards of the two companies.

Vertikal Comment

This is an interesting development and suggests that the two joint venture operations that the partners have are going better than expected. It was always planned for Palfinger and Sany to move closer as the partnership developed and a share swap was ‘on the cards’ from the start.

The Palfinger family is very protective of its holding in the business and the fact that it has a controlling interest has been a distinct advantage over the past 10 years, allowing the business to invest for the long term.
While the deal with Sany will reduce the Palfinger family holding to around 57 percent it will also dilute the number of shares in free circulation.

It is entirely possible, even likely, that Sany will at some point in the future look to take control of Palfinger, as it did with concrete pump manufacturer Putzmeister. However that decision will only be possible with the full agreement of the Palfinger family.

What is more likely is that sometime in the future one partner or the other will take over full control of one or both of the joint ventures. Depending of course on how they develop and grow over the next few years.

More than anything else this looks like a statement of between the two companies that they are happy to continue pressing ahead and developing their current partnerships.