08.11.2005

China crane company sold to US buyer

The Carlyle Group has signed a definitive agreement to purchase an 85 percent shareholding in Xugong Group Construction Machinery Co., Ltd. (XCMC), the largest construction machinery manufacturer and distributor in China, for $375 million in cash.

XCMC is currently owned confusingly, by Xuzhou Construction Machinery Group (XCMG), a wholly owned company of the city government of Xuzhou, it will retain a 15 percent holding in the business.

The agreement follows a lengthy auction process, with two rounds and six international bidders. XCMC the worlds, largest manufacturer of truck cranes, which even more confusingly carry the XCMG brand, it produced around 4,500 units last year, more than double that of its nearest rival. It also has joint ventures with Caterpillar for hydraulic excavators and Liebherr for concrete mixer trucks. Its 2004 sales were RMB 17 billion, approximately $2 billion.

At last years Bauma China, XCMC caused some visible reaction from Liebherr Ehingen staff, when they saw the company’s latest mobile cranes, which could easily have been mistaken for their own at a quick glance.

In 1995, XCMC and Liebherr-Ehingen signed an agreement allowing XCMC to manufacture three Liebherr All Terrain models under license. However the cranes on display last year looked far closer to Liebherr’s more recent designs, than the old technology from that license agreement.
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An XCMG truck crane at Conexpo 2005

The Chairman of XCMC, Mr. Wang Min, said: "This is the right choice for a win-win outcome. It will unload our heavy historical burdens as a State Owned Enterprise, build an energetic and competitive system in the company, help us reach out to more international channels, and realize the dream of several generations of Xugong people to build an international brand. Carlyle will also bring technological innovation and new investment projects. XCMC will become a much stronger enterprise and be prepared for international expansion."

Managing Director and Co-head of the Carlyle Asia Buyout Group, Mr. X.D. Yang, said: "We are excited about this important investment in XCMC, one of our largest in China. The XCMC management team has built a solid business, and we look forward to working with them to create a leading international construction equipment company with deep roots in China's fast developing industrial sector and creating an international brand.”

Carlyle is a heavy investor in the industrial sector. Since its inception in 1987, Carlyle has invested $11.8 billion in more than 40 industrial companies around the world. Current industrial companies under management recorded combined revenues of more than $12.7 billion and in total employed more than 54,700 people worldwide in 2004.