Weichai to buy stake in Kion

Weichai Power Co, China's leading producer of diesel engines, plans to invest 738 million euros ($928 million) in German forklift maker Kion Group GmbH, the company announced over the weekend.

Weichai will acquire 25 percent shares of Kion for 467 million euros through capital enhancement and invest the remaining 271 million euros to take a 70 percent stake in Kion's hydraulics business that will be operated by an independent firm after the transaction, the firm said in an announcement posted on the Shenzhen Stock Exchange.

The acquisition plan was approved Friday at a board meeting of Weichai Power. The deal is subject to approval by the Chinese government as well as overseas regulatory agencies.

Following the acquisition of Kion's hydraulics business, Weichai Power will become a leader in the manufacturing of high-pressure hydraulics products, which will help extend its product line and boost its penetration into the international market, said the announcement.

This strategic partnership is an important step for the company's "global expansion into new markets and products," said Tan Xuguang, CEO of Weichai Power Co.

Experts said that the acquisition, coming at a time the eurozone economy is sluggish, might bring benefits to both companies.

"It is a good timing for Chinese enterprises to acquire European assets at low prices as the European economy is slowing down," Li Weidong, a research director with the ChinaVenture Consulting, told the Global Times Sunday.

The European companies will get funds to operate their main businesses as well as access to a new emerging market, China, Li noted.

Feng Pengcheng, a research director with the Institute of International Economy at University of International Business and Economics, said that the acquisition of European counterparts will bring Chinese enterprises mature management practices and advanced technologies, which will enhance the latter's branding and image around the world.

Chinese enterprises have been active in making acquisitions in Europe recently.

On January 31, heavy machinery producer Sany Group Co bought German engineering machinery producer Putzmeister Holding GmbH.

Weichai's parent company Shandong Heavy Industry Group acquired 75 percent stake of Italian luxury yacht maker Ferretti on January 10.

"The acquisition of overseas companies is becoming a major way for Chinese enterprises to expand into global markets," Feng told the Global Times Sunday. "But they need to be aware of the challenges in the wake of acquisitions."

Generally speaking, Chinese firms have not been able to achieve desired results from acquired foreign firms due to different legal systems and cultural backgrounds, said Feng.