Manchester, England — Renold plc has acquired a 90% interest in the industrial chains manufacturing business of HangZhou ShanShui (HZSS).
HZSS operates from a large production plant based in Zhejiang Province, Peoples Republic of China, and has annual sales of approximately US$9 million and more than 400 highly skilled employees. This workforce will represent about 30% of Renolds worldwide employees directly involved in the manufacture of chains.
The agreed price of US$4 million represents net asset value and will be settled in cash. The acquisition will significantly increase the Renold Groups future available manufacturing capacity, and will remove the need for US$8million of budgeted capital expenditure for this year.
The acquisition, which has received regulatory approval in China, and which is expected to be completed in June 2007, will significantly increase the percentage of Renold production in low cost countries (LCCs). The Groups PACE (profit and cash enhancement) objective of growing headcount in LCC chain manufacturing to over 40% of the Group total by the end of the 2008/9 fiscal year.
The acquisition also reinforces the companys position as a global leader in the manufacture of industrial chains by opening up new markets and customers in China and South East Asia.
The business will be called Renold Hangzhou, and is expected to increase group sales and be earnings-enhancing after 12 months. The outlook for the sectors that it serves remains broadly positive with particular opportunities in its domestic markets.
An update on the progress of PACE and the impact of this acquisition will be included in the results announcement for the year to 31 March 2007, which is expected to be released in June.
Bob Davies, chief executive of Renold, commented:
“The purchase of this substantial Chinese manufacturing facility will underpin the execution of our PACE restructuring and will boost margins to a run rate greater than 10% by 2008/9.
“HZSS has the strongest technology of all the potential acquisition targets we looked at. It also provides a major growth opportunity in the domestic Chinese market and into other parts of South East Asia.”
Renold has existing operations in China, including sales offices in Beijing, Shenyang and Guangzhou, as well as two subsidiaries, Renold Transmission (Shanghai) Company Limited and Renold Technologies (Shanghai) Company Limited.