China JV planned by Cargotec

Cargotec is planning to establish a joint venture with Jiangsu Rainbow Heavy Industries Co., Ltd. (RHI) in China.

The deal would provide additional crane services globally, expand delivery capacity and target growth opportunities in the Chinese and global markets.

RHI has been a longstanding supplier to Cargotec as a manufacturer of hatch covers, cargo cranes and other products. The joint venture will focus on ship to shore cranes, rubber tyred gantry cranes, rail mounted gantry cranes and marine specialty cranes. To start with a majority of production will be aimed at global markets, with the Chinese market forecast to grow strongly.

Under the partnership, Cargotec would own 49% of the joint venture, while the value of Cargotec's equity investment is about €30 million (US$43.4 million).

"This joint venture between Cargotec and RHI would be a strategically important step for Cargotec to expand its presence and offering as well as to improve competitiveness in China. RHI's local presence, knowledge and experience, combined with Cargotec's technology competences, access to global markets and established brand, offer the joint venture an excellent position in the market and enable close cooperation with customers in Asia-Pacific," said Mikael Mäkinen, Cargotec president and CEO.

Wu Jian, RHI chairman added, "A joint venture with Cargotec would provide us access to global markets and remarkable growth. By joining forces we create a company that is expected to be a significant player in the market with a globally competitive product portfolio."

Cargotec also plans to strengthen its strategic partnership with RHI by becoming an owner in the company. Cargotec will acquire a 49% interest in China Crane Investment Holdings Limited for about €50 million ($72.4 million). China Crane currently owns 18.75% of RHI shares.

China Crane is a Hong Kong based company with the sole purpose of owning the RHI holding. Cargotec will acquire the 49% China Crane stake from Carlyle Asia Growth Partners IV, an investment fund managed by global private equity firm The Carlyle Group.

The transaction is subject to the relevant regulatory approvals, which are expected to be received in the next six to eight months, with the joint venture starting operations in early 2012. This means that the joint venture is not expected to impact Cargotec's financial outlook for 2011.