* Chinese conglomerate buys quarter of German forklift truck
* 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 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,
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
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
Nomura Holdings was the sole advisor to the Chinese company,
a person familiar with the matter told Reuters.