Business Daily from THE HINDU group of publications
Wednesday, Feb 28, 2007
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Business Daily from THE HINDU group of publications Wednesday, Feb 28, 2007 ePaper |
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Corporate
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Mergers & Acquisitions Logistics - Roadways Volvo to buy Ingersoll's road development unit for $1.3 b Our Bureau
Big buy The acquired business includes a full range of heavy compactors, asphalt pavers and milling machines. It also includes 20 dealerships in North America and distribution companies in Europe and Russia.
In a notice to the Bombay Stock Exchange, Ingersoll Rand said the sale of the road development business, which forms part of the construction technologies' segment, will take place after necessary legal consent and board approval. Ingersoll Rand's shares rose 1.44 per cent to Rs 337.05 on Tuesday. The Indian operations of the company in which the US parent holds 74 per cent stake, recorded 28.42 per cent increase in sales to Rs 169.82 crore on a net profit of Rs 14.48 crore, which rose 65.67 per cent during the third quarter of 2006-07.
Expansion plans
"I am pleased that we can continue to expand our successful construction equipment business and the acquisition gives Volvo Construction Equipment (CE) a world-leading position within heavy road construction equipment," the Volvo CEO, Mr Leif Johansson, said in a Press statement. "This acquisition is strategically important since it will improve the overall competitiveness of Volvo CE as a full-range supplier of construction equipment." The global market for road construction equipment is about $4 billion annually and is projected to grow substantially as a result of increased investments in infrastructure globally. Volvo CE has an ambition to expand in this market and the acquisition complements current operations by strengthening Volvo's presence in equipment for road construction work. The acquired business includes a full range of heavy compactors, asphalt pavers and milling machines, and provides favourable growth possibilities. The acquisition also strengthens Volvo CE's position in the market for materials handling equipment in North America.
Growth possibilities
In addition, the acquisition includes 20 dealerships in North America and distribution companies in Europe and Russia, which will leverage Volvo CE's sales of compact equipment, primarily in North America. "Strategically, the acquisition of Ingersoll Rand Road Development fits exceptionally well with Volvo's current operations within motor graders and positions," Mr Tony Helsham, President of Volvo Construction Equipment said. "Geographically, the purchase also fits Volvo CE very well and provides attractive growth possibilities by capitalising on the common dealer network in North America, Europe and Asia." Synergies at operating income level, mainly attributed to sales and distribution, are estimated at Swedish Kroner 600 M annually to be achieved within a five-year period. The acquisition is primarily being carried out as an assets purchase and the transaction is expected to reduce the net financial position for Volvo by Swedish Kroner 9.2 billion. Closing of the transaction is expected during the second quarter 2007 and is subject to relevant approvals. Ingersoll Rand's division for road development, with headquarters in Shippensburg, Pennsylvania in the US, has about 2,100 employees. In 2006, the operations reported sales of $864 million and operating income of $101 million. The operations have manufacturing units in the US, Germany, India and China.
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