Published March 27, 2009

ST Engg unit acquiring two China firms

Eventual 75% stakes in road building equipment firms to cost 162m yuan

By CONRAD TAN

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SINGAPORE Technologies Engineering is buying majority stakes in two Chinese makers of road construction and maintenance equipment for a total of 162 million yuan (S$36 million).

ST Engineering said yesterday its land systems arm ST Kinetics has signed two agreements to buy a 59 per cent stake in the two firms - Zhenjiang Huachen Huatong Road Machinery Co (HCHT) and Zhenjiang Huatong Aran Machinery Co (HTAR) - from their majority shareholder for 85 million yuan.

The acquisitions are subject to ST Kinetics buying a further 33.11 per cent stake in HCHT and another 16.3 per cent of HTAR from the two companies' other shareholder, Jiangsu Huatong Machinery Co - which owns the remaining 41 per cent of both firms - for a total of 52 million yuan.

If the acquisitions are approved by Chinese regulators, ST Kinetics will own 92.11 per cent of Huachen Huatong and 75.3 per cent of Huatong Aran.

ST Kinetics plans to inject a further 25 million yuan in cash into HCHT after the deals are completed, while Jiangsu Huatong Machinery will inject land, on which some of the factory buildings of HCHT are situated, into the firm.

The land injection from Jiangsu Huatong Machinery will dilute ST Kinetics' final stake in HCHT to 75.3 per cent, the same as its stake in HTAR.

Jiangsu Huatong Machinery will own the remaining 24.7 per cent stake in each of the two companies.

The acquisitions 'are in line with ST Kinetics' strategy to grow its specialty vehicles business in China and the region', ST Engineering said in a statement.

ST Kinetics already has two other specialty-vehicle joint ventures in China - one that makes off-road dump trucks and another that produces wheeled excavators. It hopes the latest acquisitions in China will also expand its product development and production capabilities in road construction and maintenance equipment, adding to those of VT LeeBoy, its wholly owned US subsidiary.

'These acquisitions would allow us to extract value from the relationships between VT LeeBoy in the US and HCHT and HTAR in China to offer our dealers and customers in both countries and beyond, a more comprehensive range of road construction and maintenance equipment,' said ST Kinetics president Sew Chee Jhuen.