China machine tool giant acquires German plant

China's machine tool manufacturer tycoon, Shenyang Machine Tool Group (SMTL) announced here yesterday that it has bought Germany's Schiess AG.

Schiess AG is a machine tool manufacturer with some of its products taking the lead in world markets. It is located in Sachsen-Anhalt of Germany, which is two hours' drive from Berlin, reported China Daily on Tuesday.

It announced bankruptcy on August 1, 2004.

The contract for the acquisition was signed at the end of this October, according to Geng Hongchen, general manager of the Shenyang Machine Tool Co Ltd.

He said the former Schiess AG - a 140-year-old firm - has been renamed Schiess GmbH.

It has become a wholly owned German-based subsidiary of the Shenyang group.

The new plant began operating on November 11, according to Geng, who was appointed general manager of the new plant. He and the former CEO of Schiess are jointly overseeing the new firm.

Although Geng declined to disclose specific figures, he said the total budget for this takeover was 80 million yuan (US$9.67 million).

This includes the cost for all of the former company's land, buildings, machinery and equipment, patents and other intellectual property.

"This is a very, very cheap price. What we took was not only its permanent assets but also its famous brand name," said Geng.

He said there is some distance between SMTL and some international counterparts, even though the group has been the No 1 machine tool manufacturer for years in China.

"We can take this shortcut to start our own high-end product design and production through this acquisition," said Geng.

Moreover, the Shenyang group will use Schiess as its overseas base for research and development, training and marketing. Through cost reductions, it will build the company into a springboard for the Shenyang group's products to enter the European market.

Geng said the new plant has signed 7 million euros worth of contracts with clients from China and Russia.

He even expected this new plant would help sell US$10 million worth of products of SMTL in Europe.

Detlef Wolf, senior marketing official from Schiess, said the acquisition would benefit both sides of China and Germany.

Geng noted the new plant will keep more than half of the former 235 employees.

The Shenyang group realized record-high sales of 1.3 billion yuan (US$157 million) last year. And Geng expects this year could touch 4 billion yuan (US$483.6 million).

The firm is not the first Chinese machine tool manufacturer to make an overseas acquisition. Since 2002, other domestic machine tool firms, including Dalian machine tool group and Baoji-based Qinchuan Machine Tool Group, began the international acquisition.

Even though senior officials from SMTL sang high praises about this acquisition action, industry insider said they still have a long way to go as the long-distance and different culture background would pose another hurdle in their future co-operation.

Source: China Daily