BEIJING Aug 15 (Reuters) - China's Zoomlion Heavy Industry Science and Technology Co Ltd said on Friday it was bidding to acquire a 60 percent stake in farm machinery maker Chery Heavy Industry Co Ltd for 2.09 billion yuan ($340 million).
Zoomlion, seeking to profit from Beijing's drive to promote large-scale rural modernisation, said in a stock exchange statement the move could help propel the company to "become a leading agricultural machinery enterprise in China."
The deal comes as major Chinese construction equipment makers such as Zoomlion and Sany Heavy Industry respond to a drop in demand for machines to build high-rise blocks, bridges and roads in the domestic market. Zoomlion issued a profit warning last month citing sluggish demand.
The Changsha-based company said it is seeking to acquire 1.8 billion shares in Chery Holding. Chery's turnover last year was "one of the highest among the agricultural machinery enterprises in China," the statement said.
The deal, which is being brokered at the Anhui Changjiang Equity Exchange, will also help Zoomlion compete with international firms like John Deere and CNH Industrial NV , controlled by Fiat SpA.
Global farm machinery peers have also expanded in China, lured by Beijing's determination to retool a farming industry where annual gross output is far behind the U.S. level.
Zoomlion chairman Zhan Chunxin told Reuters in March he was open to various acquisition opportunities. Over the past three years, the company has explored deals outside the construction machinery segment, including commercial vehicle partnerships and the acquisition of manufacturers that make street-cleaning machines, Zhan said.
Fiat's CNH, which opened a small joint venture in Shanghai many years ago, has opened three additional plants in China since last year. Among them is a $100 million factory in Harbin capable of making machines from planters and combine harvesters, to balers and hay tools.
"Mechanisation is key to the development of agriculture in China and it's a big driver of our business here as well," CNH Industrial's China chief Luca Biagini told Reuters in a recent interview. (1 US dollar = 6.1466 Chinese yuan) (Reporting by Fang Yan and Matthew Miller; Editing by Kenneth Maxwell and David Evans)