UPDATE 2-China's Shandong takes stake in Germany's Kion
* Chinese conglomerate buys quarter of German forklift truck maker
* Deal worth 738 mln euros, part of strategic partnership
* Shandong to invest in Germany, Asia
* Kion says IPO remains aim, more likely following deal
By Edward Taylor and Andreas Kröner
FRANKFURT, Aug 31 (Reuters) - Shandong Heavy Industry Group will buy a one quarter stake in Kion Group, giving China access to industrial technology from the world's number two fork lift truck maker in the largest direct investment by a Chinese company in a German firm.
The 738 million euro ($922 million) deal, which is expected to close in the last three months of the year, opens the door for the German group in Chinese and Asian markets.
Shandong Heavy's purchase will offer relief for private-equity-owned Kion which faces a large round of debt refinancing next year, sources had told Reuters.
Earlier this week Reuters reported Shandong and Kion were close to striking a deal.
Shandong unit Weichai agreed to pay 467 million euros for a 25 percent stake in Kion Group and a further 271 million for 70 percent of Kion hydraulics, a unit of the Wiesbaden, Germany-based firm.
Tan Xuguang, Chairman and CEO of Shandong Heavy Weichai Power, said: "This partnership is an important step in our five-year strategy to globalise."
China has a five-year development plan that puts emphasis on industries such as high-end manufacturing equipment.
In Germany Chinese buyers are looking at the chemicals, automotive and the industrial machinery sectors, said Yi Sun, a partner at Ernst & Young in Germany.
The fact that China has loosened its rules on foreign investment and that Chinese companies have grown more confident will be a catalyst to further deals, she said.
"Chinese buyers are currently negotiating in several medium sized and large takeover situations in Germany. I'm confident that we will see the first takeover of a German company worth a billion (euros) in the short to medium term," Yi Sun said.
Weichai pledged to honour all existing collective labour agreements and to create a new production site for Linde Hydraulics in Germany as well as expanding activities in China.
Weichai has the option to increase its stake in Kion to 30 percent in the event of an initial public offering of Kion, and to raise its stake in Kion hydraulics, the companies said.
Weichai Power is a unit of Shandong Heavy Industry Group, a China-based leading industrial manufacturer of commercial vehicles, construction machinery, power systems, auto parts and yachts.
Earlier this year, Shandong Heavy scooped another European asset, when it bought a controlling stake in debt-laden Italian luxury yacht maker Ferretti..
Chinese state-owned companies have historically focused on buying natural resource operators but have recently targeted deals aimed at securing technology know-how.
The parent of carmaker Geely bought Ford Motor Co's Volvo unit in 2010 and Lenovo Group Ltd acquired the personal computer business of International Business Machines Corp in 2004.
Kion is owned by the private equity arm of Goldman Sachs and buyout firm KKR.
KKR and Goldman Sachs Capital Partners paid German industrial gas firm Linde 4 billion euros in late 2006 for Kion, Europe's leading forklift truck maker and number two globally behind Toyota Industries.
At the time, KKR and Goldman said they had a medium-term plan for an initial public offering of Kion, and in 2007, Kion said it aimed to be ready for a flotation in 2009.
Kion said on Friday an initial public offering remains a strategic aim, adding that the Chinese investment made this more probable.
Nomura Holdings was the sole advisor to the Chinese company, a person familiar with the matter told Reuters.