Zoomlion refocuses on construction

The Chinese-based firm Zoomlion has entered a conditional agreement to sell an 80% stake in its environmental sanitation business, Changsha Zoomlion Environmental Industry, and accompanying assets for a value of CNY11.6 billion (US$1.68 billion), with a view to focusing on its core construction and agricultural equipment businesses.

Subject to terms and conditions, 51% of the equity interest will be transferred to the electronics and environmental protection equipment maker Infore Holding, 21.6% to Hony Investment, 4% to Guangzhou Investment, and 3.4% to the investment firm Lulian Junhe.

The 80% stake sale – which implies that the entire unit is valued at CNY14.5 billion (US$2.11 billion) – comes as a major adjustment of Zoomlion’s strategy.

Zoomlion’s board said it intended to apply a significant proportion of the net proceeds to replenishing the company’s working capital, repaying its debts and developing the group in the future. With the cash reserve provided by this divestment, Zoomlion believes it will be able to grow and improve its core business in line with its strategy of globalisation.

Despite being hit by weaker demand from the construction market last year, the company said it expected to see demand grow again on the back of Beijing’s push for rural infrastructure construction and support for infrastructure construction as part of the new One-Belt, One-Road development initiative.