SINOMACH negotiates MAG "Made in Germany" and encounters market crisis

Following Sany Heavy Industry's acquisition of Putzmeister and Shandong Heavy Industry's acquisition of a quarter equity of KION Group, another domestic machinery giant has extended an olive branch to “Made in Germany”. According to Reuters, China National Machinery Industry Corporation (China Machine Group) has formally submitted its offer to the German rival MAG Group.

Under the European debt crisis, German companies were caught in an unprecedented market situation and stimulated Chinese companies to constantly accelerate the pace of “Made in Germany”.

I. Pass the SINOMACH Group to purchase MAG

Reuters reported that SINOMACH has submitted a tender offer to German machine tool maker MAG Group. A MAG spokesperson confirmed that the company is currently negotiating with potential buyers and "is expected to complete negotiations in the fourth quarter."

The media quoted sources as saying that Komatsu and two private equity firms also proposed to acquire MAG’s European operations, and another seven companies proposed to acquire McGovern’s Americas business.

According to statistics, MAG's annual revenue is about 1 billion euros. Last year, the company’s unearned earnings before interest, tax, depreciation and amortization (EBITDA) was EUR 105 million. The company employs approximately 3,500 employees worldwide. The MAG had previously hired Goldman Sachs to help them find buyers, hoping to sell the entire company at a price of more than 500 million euros (about 645 million U.S. dollars) or to sell European businesses for at least 250 million euros.

According to previous news, several domestic companies had intended to acquire MAG's business, including Shenyang Machine Tool, Dalian Machine Tool Group, Qiqihar Machine Tool Group and so on.

Second, the "Made in Germany" suffered a market crisis If the acquisition of MAG succeeded, Chinese enterprises would add another example.

In the context of the unresolved debt crisis in Europe, it seems that it is no longer difficult to climb. According to relevant data, in December of this year, more than 12,000 German companies went bankrupt, and many brands with decades or even hundreds of years of history face the disappearance. The German companies with weak growth and lack of funds have a strong desire to sell. They are in line with domestic companies that have always coveted “Made in Germany” and are eager to demand advanced technology and management systems. They are led by strong domestic companies, and they have mature brands. Technical European companies have frequent outbound M&A transactions.

In January 2012, Sany Heavy Industry, a Chinese construction machinery company, and CITIC Industrial Investment Fund (Hong Kong) Consultancy Co., Ltd. spent EUR 360 million to acquire 100% equity of Putzmeister, Germany; in March, Lingyun, a subsidiary of China Ordnance Industry Group The Group’s Other companies within the United Nations have included the world’s largest car lock manufacturer, Germany’s Kiewide, and in July XCMG acquired 52% of the German concrete giant Schwein & Company.

Cases of mergers and acquisitions this year include Wugang's purchase of Taisho Krupp's Tailored Welding Board subsidiary and Shandong Heavy Industry's acquisition of 700 million euros to acquire a quarter of the old German forklift manufacturer KION; cement pump manufacturer Putzmeister The world-famous leader in concrete equipment, Shi Weiying, and the world's leading manufacturer of car door locks, Kai Yi De, have been included in Chinese companies.

Third, China bargain Europe ushered in a good opportunity?

The data shows that in 2011, the amount of M&A of Chinese companies in Europe has exceeded 70 billion U.S. dollars, almost 10 times that of 2010. According to data released by PricewaterhouseCoopers, the investment in China’s mergers and acquisitions of foreign companies reached US$23.9 billion in the first half of this year, compared with only US$7.9 billion in the same period of last year. Nearly 70% of China’s foreign investment flows into energy and raw materials. Among them, when Chinese companies invest in Germany, they emphasize high-tech companies and their investment is still increasing.

The agency predicts that this year will reprise the golden window of Chinese companies going abroad. As the president of Sany Heavy Industries said to Wenbo, the European debt crisis gave the company more opportunities for overseas acquisitions. As an industry that relies more on technology than on low-cost advantages in the “Made in China” family, the machinery industry’s ability to enhance technology development through overseas M&A is a barrier that cannot be bypassed. Therefore, more overseas mergers and acquisitions will surface in the future.

However, industry insiders also reminded that although the economic downturn in Europe, the valuation will be relatively cheap, but the domestic companies to Europe to mergers and acquisitions is more about its technology and brand, so the valuation judgments should be more cautious. Although domestic private enterprises have the strength of overseas mergers and acquisitions in terms of financial resources, it is still a long way to go before they truly become international companies with a certain influence in the world. Foreign economic environment, legal barriers, and cultural integration will all become factors that restrict the success of mergers and acquisitions.

A related person from the China-Germany Chamber of Commerce and Industry in China stated that when Chinese companies go to Germany and purchase roads, they need to pay special attention to some issues. For example, while ensuring that the original employees of the acquired company have jobs, they must also increase local employment as much as possible, and maintain or improve the enterprise. The original image and other issues.