Master of Great Feats

Doosan Infracore pulls off another huge deal acquiring 3 biz units from Ingersoll Rand

Doosan Infracore has pulled off one of the largest M&As for a Korean firm amounting to some $4.9 billion on July 30 in New York. The deal was finalized by the participants from both parties, Vice Chairman Park Yong-man and Chairman Herbert Henkel of Ingersoll Rand Corp.
Under the deal, Doosan Infracore and its affiliate Doosan Engine will take over three business units of the U.S. heavy equipment maker, the bobcat, the maker of small construction equipment, attachment, and utility units, Doosan Infracore is assured to be the 7th largest heavy equipment maker in the world.
The two Doosan affiliates will now set up a joint overseas subsidiary to take over the small heavy equipment production facilities from the U.S. firm, which has 27000 dealer networks around the world and 16 production plants in 6 foreign countries. The company's sales last year reached $2.6 billion and net profit $370 million.
Of the three business units, the heavy equipment enjoys 38 percent share and 43 percent share in the U.S. and European heavy equipment markets. The attachment unit which produces attachment for heavy equipment also has high market share in the world with 8 percent. The utility unit which produces air compressors for rock boulder crackers also has high market share with 28 percent.
Doosan Infracore will increase its dealer network around the world with the acquisition of the Ingersoll Rand units to 3,700 and 20 heavy equipment manufacturing plants some 20 countries including China, Belgium, North America, France, and Czech Republic. The company also expects its total sales at home and abroad would be hiked to 7 trillion won from 4.4 trillion won initially projected at the start of this year.
Vice Chairman Park said the company expected the acquisition will boost its global competitive level and plans to maximize the management capacities of the Doosan managers and new managers so that the company will grow to be the 5th largest in the world in terms of heavy equipment manufacturing and marketing.
Doosan's feat in unleashing such a big deal with Ingersoll Rand is one of the Doosan Group's steps to jump up as a globally known heavy equipment maker and Doosan Infracore is likely to move ahead and continue to acquire foreign firms, not satisfied with the current place, the 7th largest heavy equipment maker after the deal with the U.S. heavy equipment company.
The deal with the U.S. company is a big fish really, can't even be compared to LG Electronics acquisition of Zenith at the price of $366 million in 1995, and Korean firms M&As in 2005 totaled only $451 million, making Doosan deal 10 times larger.
One of the true reasons for the big deal is to supplement Doosan Infracore's inability to make small heavy equipment to secure a broader variety of product portfolio and global level high technology and Ingersoll Rand with 135 years history appeared to have what Doosan people have been looking for. The company's dealer network for its three business units alone came to 1,450 in North America, 322 in Europe and 67 in China. Doosan people said it would be possible to link its R&D activities in China, Europe, the United States and Korea.
What is the biggest thing left for Doosan to do's It is securing enough funds to make cash payments and the company plans to collect funds from the acquired firms and only has to pay $700 million in cash. Korea Development Bank is ready to help out the company to meet payments.
For the company, it is the 10th M&As that the company made since it took over the Korea Heavy Industrial Co. for 305.7 billion won and in 2005, the company this time acquired Daewoo Integrated Machinery Co. for 1.688 trillion won to make its heavy equipment production sector strong. The company changed the name to Doosan Infracore.
About 90 percent of the group's sales last year amounting to 14.2 trillion won came from the heavy industry side. The business community doesn't think the group would now sit still and won't go for more M&As if chances came in its way. The reason is that the group has been sweeping the Middle East and China with its heavy equipment products, but it doesn't have a large construction firm as an affiliate. Business watchers don't rule out the possibility of the group taking pot shots at taking over either Hyundai Construction and Engineering or Daewoo Marine and Shipbuilding when they are put on the auction block, attracted by their retained earnings totaling from 1 to 2 trillion won.
Vice Chairman Park Yong-man after signing the agreement in New York, said the deal is big enough to make up the construction equipment market around the world. He said the move is part of the group's effort to speed up its growth. He said we can secure global competitiveness of Doosan Infracore in a matter of second, explaining the background for the takeover.
If other affiliates in the group exert efforts, the group would not have trouble achieving 100 trillion won in annual sales by 2015, he stressed. nw

Vice Chairman & CEO Park Yong-man of Doosan Infracore Co.