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Xugong looks at overseas listing

By Liu Yiyu (China Daily)
Updated: 2009-10-20 10:08

Construction machinery manufacturer Xuzhou Construction Machinery Group (Xugong) said it intends to rope in a new strategic investor and list overseas after completing its asset restructuring, China Business News reported, citing the group Chairman Wang Min.

The State-owned group intends to list overseas in the next five years, "either in the US or Hong Kong", the report said, citing Wang.

Industry experts said the overseas listing would fuel the machinery manufacturer's global dreams.

Xugong has set an annual revenue target of 100 billion yuan ($14.65 billion) before 2015 and intends to also become the fifth largest construction machinery firm in the world by then.

Main engines for construction machinery, special purpose vehicle chassis and key components are expected to be the major contributors of Xugong's revenue, with each generating 58 billion, 15 billion and 15 billion yuan in revenue respectively, according to the chairman.

The group is currently ranked the 15th construction machinery manufacturer globally, with revenues of around 40 billion yuan last year.

Xugong Construction Machinery Co, the Shenzhen-listed arm of Xugong including a bunch of subsidiaries, posted better-than-expected earnings for the first nine this year. Despite the export slump, its profit increased tenfold due to the plummeting prices of steel - a raw material for making machinery equipment, according to a research note by CITIC Securities.

The group chairman also did not rule out the possibility of introducing a new strategic investor after an investment plan from Carlyle Group fell through last year.

A spokesman of Xugong said yesterday that they have been scouting for a strategic investor after the Carlyle deal failed.

The long-pending investment plan between Xugong and Carlyle had sparked controversy over the security of China's key industry and valuation of national assets.

"This (the controversy) will no longer be the manufacturer's problem since the group will be fairly priced through its listed bodies," said Qiu Shiliang, industry analyst at Everbright Securities.

Related readings:  Xugong nodded for IPO  Carlyle abandons Xugong dream  China's Xugong drops equity sale to Carlyle

Carlyle had offered $375 million in 2005 for a controlling stake of 85 percent, but trimmed it to 45 percent in 2007. The Ministry of Commerce, however, rejected both the offers.

Xugong also intends to start a new round of system reforms after its listing on the stock market, the group chairman said.

"An overseas industry investor would be the manufacturer's ideal candidate. The group will maintain its position as a controlling shareholder while the investor could help the manufacturer expand the overseas market and provide management guidance," said Qiu.