Target Company Overview

The KION Group GmbH has formed a joint venture with Jingjiang Baoli Forklift Co., Ltd and Jiangsu Baoli Group Co., Ltd, collectively referred to as the 'Baoli Companies'. This partnership aims to establish KION Baoli (Jiangsu) Forklift Co., Ltd, specifically designed to develop, produce, market, and service forklift trucks within the economy segment. KION holds a majority stake of 60% in this newly formed entity, which is strategically located in Jingjiang, Jiangsu Province and will officially commence operations on January 16, 2009.

KION Baoli represents KION's fourth brand and is positioned to address the economy segment of the market that was previously not catered to by the KION brand portfolio. The product offerings of the Baoli Companies include diesel/LPG and electric forklift trucks with load capacities ranging from 1 to 10 tonnes. Notably, 50% of Baoli's sales come from exports, particularly targeting rapidly growing regions such as Asia, Central and Eastern Europe, and Latin America.

Industry Overview in China

The industrial truck market in China has seen significant growth in recent years, driven by an increase in manufacturing and logistics activities. The country has become the largest industrial truck market globally, with robust demand for both high-end and economy segment vehicles. The economic climate in China, characterized by rapid urbanization and industrialization, fuels demand for efficient handling solutions.

China's forklift market is diverse, encompassing a wide range of applications across industries like logistics, warehousing, and manufacturing. As the market matures, there is a noticeable shift towards more efficient and productive equipment, creating opportunities for both established and new players in the economy segment. KION's investment allows it to tap into these high-growth areas effectively.

The Baoli Companies have outpaced the market growth rate in recent years, indicating a strong demand for their products. KION's joint venture with Baoli positions it to leverage this growth trend while expanding its presence in a competitive landscape. With branches and sales offices already established in over 40 cities across China, KION Baoli is poised to integrate seamlessly with existing KION facilities and sales networks.

Rationale Behind the Deal

The establishment of KION Baoli aligns with KION Group's strategic goals of expanding its market share in the economy segment globally. By integrating Baoli's operations into its portfolio, KION is enhancing its product offerings and meeting market demand more effectively. This move also strengthens KION's capabilities in the rapidly growing Chinese market, which is critical for long-term growth.

Furthermore, Baoli's established reputation as a successful forklift producer in China complements KION's already robust operations in the country, thus expanding its brand portfolio and reinforcing its position as the largest international forklift truck producer in the region.

Information About the Investor

The KION Group is a prominent global player in the industrial truck sector, holding a significant market share in Europe with its Linde, STILL, and OM brands. The company has a strong presence globally, employing over 21,000 people and generating revenues exceeding EUR 4.3 billion as of 2007. By establishing KION Baoli, the group enhances its strategic footing in Asia, a vital area for growth.

KION has a dedicated subsidiary, Linde (China) Forklift Truck Corp Ltd, which has been operating in the Chinese market since 1993. With its extensive experience and resources, KION is well-positioned to leverage its operational strengths and drive the growth of the Baoli brand in emerging markets.

View of Dealert

The establishment of KION Baoli is viewed positively as a strategic investment in a high-growth market. The partnership not only expands KION's product array but also allows the company to capture a segment of the market that is experiencing significant demand. Given Baoli's established reputation and market presence, the integration appears to be a synergistic fit.

KION's strategic focus on the economy segment is timely, as there is a clear trend towards affordable yet efficient handling solutions within emerging markets. This direction aligns well with global trends in industrial modernization, creating potential for substantial returns.

Additionally, the drive to expand Bolo's product offerings in the warehouse equipment sector presents further opportunities for revenue growth and market expansion. Overall, this investment is anticipated to strengthen KION's competitive position and enhance its footprint in an essential market.

In conclusion, the KION Group's joint venture with the Baoli Companies is set to be a beneficial move, providing both firms with opportunities to capitalize on their respective strengths while navigating the complexities of the Chinese industrial truck market effectively.

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