“As the main products in Shantui are bulldozers with limited market content not exceeding 6000-8000 sets even under favorable market situation, we hope to accomplish diversification of products.” One personnel from the Securities Department of Shantui—the leading giant among domestic bulldozer industry explained the reason why Shantui acquired Hubei Chutian Construction Machinery Co., Ltd.

On May 16^th, Shantui announced that the company is planning to acquire the 100% stock rights of Hubei Chutian Construction Machinery Co., Ltd. at the price of RMB 15 million Yuan. After acquisition, Shantui will increase the registered capital into 50 million Yuan, in which Shantui invest RMB 34.5 million Yuan with stocks of 90% and Wuhan Zhongnan Construction Machinery Equipment Co., Ltd. of 10%.    

Aiming at Construction Machinery

Hubei Chutian had registered capital of 10 million Yuan, mainly manufacturing, selling and repairing construction machinery and parts as well as renting construction machinery equipment. Till Jan.30^th, 2008, its assets after assessment were of RMB 56.3719 million Yuan with total liabilities of RMB 33.8881 million Yuan and net assets of RMB 22.4838 million Yuan.

 “Although the whole construction machinery industry develops fast, the capital flow of Hubei Chutian cannot meet its market demand, thus requiring external capital. Shantui acquires Chutian for its production endowment of construction machinery which is hard to gain.”

Due to unfavorable capital and operation situation in Hubei Chutian, Shantui acquired it at a not very high cost no more than 20 million Yuan including increasing capital. The acquisition will be finished before June with cash transaction.

After the acquisition, Shantui is planning to expand the operational scope of Hubei Chutian on concrete machinery and pump trucks. The feasibility report submitted by the company showed that Hubei Chutian has a large market space in these two fields.

Shantui has drafted a development outline for entering construction machinery industry, possibly realizing the goal through a series of merges and acquisitions in 2008 and 2009. Therefore, it’s also urgent for Shantui to fasten the pace of diversify the products at the same time as ensuring the advantages of bulldozer operation.

Controversial Diversification

It’s a good choice for Shantui entering construction machinery industry on the aspect of expanding enterprise scope and fastening the developing speed, but the entering threshold of this industry is higher gradually.

Some experts analyze that Sany Heavy Industry and Zoomlion has monopolized the concrete machinery, thus it must be quite difficult for Shantui to gain a leading position through acquiring Hubei Chutian. They thought the main goal of Shantui’s acquisition may be to strengthen the operation of parts as Hubei Chutian is outstanding on parts operation.

Shantui was known for its bulldozer with uprising market share. The experts considered that it’s may not be so profitable for Shantui to adopt acquisition. Acquisition need to take a lot of issues into consideration including acquisition scope and integration. As a state-owned enterprise, Shantui was much slower than civil-owned enterprises such as Sany and Zoomlion, which is another obstacle on the way for Shantui to develop as smoothly as expected.  

About Shantui 

Shantui is one of the largest manufacturers and exporters of earth-moving equipment in China.

Thanks to its variety ranges of advanced manufacturing technology and production facilities introduced from Japan, USA, Germany and other developed countries, Shantui has been the dominating manufacturer of construction machinery in China. While occupying more than 30% of the domestic market share, Shantui machinery have already been exported to more than 70 foreign countries, competing with many globe-famous brands all over the world. Sales and service networks have been established in South-East Asia, West-Asia, Africa, Australia and South America.

Shantui is becoming a truly international company. Our objective of global production, sales and supplier networks and broadening public service activities underscores our commitment to contribute to the communities we serve.