UPDATE 1-Goldman, China Zoomlion win Cifa with $422 mln bid

Wed Jun 25, 2008 4:56am EDT

(Adds analyst comments, background)

SHANGHAI, June 25 (Reuters) - Mid-sized Chinese construction machinery maker Changsha Zoomlion has won a joint bid with Goldman Sachs and two other investors to buy Italy's Compagnia Italiana Forme Acciaio SpA (Cifa) for 271 million euros ($422 million).

Changsha Zoomlion Industry Science and Technology Development 000157.SZ, which is eager to secure a foothold in developed markets, said on Wednesday it would pay 163 million euros for a 60 percent stake in the Italian construction machinery maker.

Goldman (GS.N), Mandarin Capital Partners and Chinese private-equity firm Hony Capital will hold the remainder.

"That's another major move by a second-tier Chinese construction machinery maker in mature markets after Sany announced plans for a U.S. plant," said Chen Yaobang, an industry analyst with Huatai Securities.

Zoomlion rival Sany Heavy Industry Co (600031.SS) said earlier this year it planned to invest more than $100 million in a new U.S. facility, which will make it the first Chinese firm to manufacture construction gear in North America.

"The moves will give them a foothold in mature markets and boost their overall exports," Chen said.

Zoomlion's shares, traded on the Shenzhen Stock Exchange, fell their daily limit to 18.94 yuan on Wednesday, underperforming a 3.64 percent gain in the Shanghai Composite Index .SSEC.

Analysts said Zoomlion, whose shares had been suspended from trading since April 8, was merely catching up with the benchmark index, which slumped more than 20 percent during that period.

OVERSEAS PRESENCE

Many Chinese machinery makers are building up their presence overseas in hopes of eventually competing with global leaders such as Caterpillar (CAT.N). The Chinese government is also encouraging domestic companies to invest abroad.

The Zoomlion deal also shows an increasing connection between China Inc and private equity firms. With equity markets struggling, private equity firms are seeking more chances to sell companies to hungry Chinese buyers.

As for buyers, a China-private equity link-up allows buyout firms to deploy more capital across the region, and helps prevent a Chinese company from over-paying for an asset -- something government officials are especially sensitive about after several poorly performing overseas deals.

Chinese telecommunications company Huawei Technologies [HWT.UL] teamed up with U.S. private equity firm Bain Capital last year in an unsuccessful bid for 3Com Corp COMS.O, a U.S. network equipment maker.

Zoomlion will use $50 million of its own cash and borrow $200 million from the Hong Kong branch of Britain's Barclays Bank to fund the purchase of Cifa, which is being sold by Italian private equity company Magenta and eight other shareholders.

Zoomlion expects the acquisition to help it expand sales overseas, which came to 1.02 billion yuan ($148.6 million) in 2007, or roughly 11 percent of its overall sales.

Its chairman and chief executive Chunxin Zhan has said that he expected the company to generate 40 percent of its sales outside China by 2010. ($1=.6423 Euro; $1=6.866 Yuan) (Reporting by Samuel Shen and Fang Yan; Additional reporting by Michael Flaherty; Editing by Edmund Klamann)