Hertz Equipment Rental franchisee Mongolia Holdings has invested in one of the country’s largest road construction and earth moving companies – Monroad.
In return, Monroad will receive a 49% stake in Mongolia Holdings, and become a wholly-owned subsidiary of the company.
Founded in 2001, Monroad offers a full range of construction services including the construction and maintenance of roads, bridges, railroad lines, drainage work, earthwork, flood protection dams, and heavy equipment rental.
Two of Monroad’s largest customers to date have been the Mongolian government and Oyu Tolgoi, which is Rio Tinto's turquoise hill mine. The company reported revenues of US$19.2 million (€17.6 million) for 2014.
Mongolia Holdings president Brad Siniscalchi said, "This transaction marks a significant breakthrough for our 2016 business strategy.
"Monroad's existing facilities, capabilities and staff should significantly streamline and expedite the deployment of our Hertz Equipment Rental franchise operation in Ulaanbaatar, while potentially saving significant hard and soft launch costs.
“Mongolia Holdings will now possess a much wider array of capabilities necessary to meet growing demands for equipment and construction services, driven in part by international infrastructure development initiatives like 'One Belt, One Road' and mega-mining industry projects like Oyu Tolgoi."
Tengis Garamgaibaatar, CEO of Monroad, added, "Although it has not previously been our core focus, Monroad has operated an equipment rental business in Mongolia for many years.
“We plan to bring Monroad's facilities, equipment, highly-trained staff, equipment maintenance capabilities, logistics, market knowledge, reputation and enthusiasm to the deployment and build-out of Hertz Equipment Rental operations throughout Mongolia.
“The expanded platform makes us better prepared to tackle larger projects and to more aggressively execute the growth strategy of our existing road building and earth moving operations.
"We believe that the systems and efficiencies of Hertz and the talent and experience of the combined management team will create many advantages for Mongolia Holdings for years to come."
And chairman of Mongolia Holdings Michael Ussery said, "In addition to all the obvious benefits of this transaction, the consolidation of Monroad into Mongolia Holdings facilitates the assimilation of 15 years of market knowledge, experience and relationships, which cannot be easily replicated by other market participants.
“In addition, with the recent US$4.4 billion (€4.1 billion) financing announcement of Rio Tinto's expansion of the Oyu Tolgoi mega-mine, it's not unreasonable to expect greater economic growth for this exciting market, which, in turn could measurably increase demand for Monroad's road construction and earth moving services."