Zoomlion offers $3.2b for machinery maker
A Chinese construction company's offer to buy a US-based machine manufacturer would give the Chinese company an established dealer network, according to a construction industry consultant.
Zoomlion Heavy Industry Science and Technology Co, one of China's largest state-owned construction machinery manufacturers, offered $3.3 billion in cash on Tuesday for Terex Corp.
The company said it is talking with Zoomlion, but Terex also said its board had not yet changed its recommendation of a proposed merger with Finnish manufacturer Konecranes Plc.
Frank Manfredi, president and founder of Manfredi & Associates Inc, a Florida-based marketing and research consulting firm specializing in the construction industry, said a deal with Terex would "immediately give Zoomlion credibility" in the US.
He said the company "has got to figure out how to build a dealer network almost from scratch before they can get customers to take them seriously. But this [deal] would give Zoomlion a foothold."
"Terex has a dealer network that it has developed over the years," Manfredi said on Wednesday. "[It] also has a number of relationships with other manufacturers and supply companies with manufacturing products under contract. So Zoomlion would benefit from those relationships."
"Terex may be even stronger in Europe than they are here in the US, which could give Zoomlion a leg up in Europe as well," he added.
Chen Chaofan, an economics professor with the School of Economics and Resource Management at Beijing Normal University, said China's equipment manufacturing sector "needs to learn from developed countries in terms of technology and expertise and overseas purchase is a good way to strengthen production capacity".
Terex produces aerial work platforms, cranes and other construction equipment for miners and builders.
Zoomlion is mainly a manufacturer of high-tech equipment for the agricultural, building, energy, environmental, and transport-engineering sectors.
Manfredi told The Wall Street Journal on Tuesday that other Chinese companies with US operations have spent most of their time working to build up a reliable dealer network.
"The problem with the dealer networks in this country is there are only a limited number of them and most of the major manufacturers have those deals signed in exclusive relationships," Manfredi told China Daily. "The [manufacturers] have the power to cancel agreements with their dealers, so that's a strong incentive for dealers to remain exclusive. That's been a real problem in the US for any company that wants to enter this market."
Source: China Daily