Konecranes buys full ownership of MHE-Demag

Konecranes has signed an agreement to acquire the 50% stake in its MHE-Demag JV held by partner Jebsen & Jessen for approximately €147 million. The acquisition will significantly improve Konecranes’ market position in the fast-growing Southeast Asian markets, creating further opportunities for service sales and simplifying the distribution channel for industrial cranes and components.

The transaction will allow Konecranes to fully consolidate MHE-Demag going forward. Konecranes estimates that the transaction will add approximately €150-180 million in annual sales and approximately €25-30 million of annual EBITA to the Group by 2022, including the targeted synergies.

Teo Ottola, Interim CEO and CFO of Konecranes says, “Konecranes is currently reporting MHE-Demag as an associated company. In 2018, the net result in the Group attributable to MHE-Demag was approximately €5 million.

“With the MHPS acquisition now behind us, Konecranes is ready to take the next steps on its growth path. This acquisition underlines our intent to pursue profitable growth, and meaningfully expands our footprint in a strategically important region with several fast-growing markets. The acquisition will also bring greater balance to Konecranes’ regional sales structure.”

MHE-Demag is a leading supplier of industrial cranes and services in Southeast Asia under the MHE and Demag brands, engineering, manufacturing and maintaining a comprehensive range of industrial cranes and hoists. Its customized solutions serve a wide range of industries and customers from general manufacturing to aerospace.

MHE-Demag also provides warehousing equipment such as lift trucks and dock levelers, aerial work platforms, building maintenance units and compact construction equipment, as well as automated car parking systems.

Service represents approximately 50% of MHE-Demag’s annual net sales, with cranes and components at approximately 35% and other industrial products at approximately 15%. In 2018, MHE-Demag’s net sales were approximately SGD 285 million (€179 million) and EBITA approximately SGD 20 million (€13 million). Konecranes is the main supplier to MHE-Demag, selling crane components under the Demag brand name.

MHE-Demag, headquartered in Singapore, has approximately 1800 employees, including some 700 service engineers and operates 11 factories and more than 70 service locations throughout Southeast Asia.

MHE-Demag runs its own operations in eight countries: Australia, Indonesia, Malaysia, Singapore, the Philippines, Taiwan, Thailand and Vietnam. In addition, MHE-Demag has distribution through resellers in several countries including Brunei, Cambodia, Laos, Mongolia, Myanmar, Papua New Guinea and Timor-Leste.

MHE-Demag was formed in 1986 as a joint venture between Demag and Jebsen & Jessen and to date has built more than 26,000 industrial cranes, more than 20,000 dock levellers for warehouses, more than 2000 building maintenance systems and more than 200 car parks with more than 6000 bays.

With the acquisition, Konecranes will add scale and scope to its global service organization with an enlarged service footprint and the addition of some 700 service engineers. Synergy allows simplification of the distribution channel for its industrial cranes in Southeast Asia.

It increases Konecranes presence and market coverage in the fast-growing Southeast Asian market by growing sales in Asia Pacific by approximately 30%. After the acquisition, Region APAC will represent approximately 20% of the Group’s sales.

Konecranes expects the acquisition to create approximately €10 million of annual synergies at the EBITA level by 2022, including both revenue and cost synergies. One-time costs generated by the integration of MHE-Demag are estimated to total €6 million.

Today, Konecranes operates wholly owned subsidiaries in seven of the eight countries, where MHE-Demag has own operations. The exception is Taiwan, where Konecranes operates through a resale partner.