Tokyo-based injection press maker Sumitomo Heavy Industries Ltd. said Feb. 8 it will acquire Demag Ergotech GmbH and Van Dorn Demag Corp., a move that will create the world's largest press maker, as measured by sales, and help the Japanese firm expand outside its Asian base.
Sumitomo's statement said the companies anticipate a stock transfer March 3. Sumitomo declined to reveal the price.
Sumitomo said it is attracted to Demag's strong presence in worldwide markets, including emerging markets like Eastern Europe and Russia.
``Strengthening the sales in areas other than Asia has been SHI's challenge,'' the company said. ``SHI decided to acquire [a] 100 percent share of Demag and Van Dorn, anticipating the expansion of injection molding business in [the] U.S., Europe, Russia, India and Brazil markets with the company's competitive electric machinery technology.''
Officials at Sumitomo could not be reached, but Demag Plastics Group Chief Executive Officer Klaus Erkes said the deal is ``a consolidation that the market needs.''
``For Demag to only have the European view does not help, nor does it help Sumitomo to only have the Asian view,'' he said in a Feb. 8 telephone interview. ``Together we can move things. I therefore see it as absolutely positive.''
He said the parties have not signed the deal officially, but said he is optimistic it will be finalized.
The Feb. 8 announcement, which came a month after the firms confirmed they were in talks, caps months of speculation about Demag's future.
Schwaig, Germany-based Demag was separated in March from the plastics machinery group of its current owner, Madison Capital Partners, a Chicago investment company.
Sumitomo's statement did not disclose details of how the companies will be integrated.
Both firms have production in China, while Demag brings production in India that Sumitomo does not have. Both are active in sales in North America, although Demag shut down its North American manufacturing operation in Strongsville, Ohio, last year.
Both firms make electric presses. Erkes said he expects the Sumitomo machines and DPG's IntElect line to continue as separate models, although he said Sumitomo has more experience in all-electric presses. The deal will bring both companies advantages in the all-electric field, according to Erkes.
SHI said it has positioned injection molding machines as its core business, and foreign sales make up about 60 percent of its business, with over half of that in Asia, mainly in China.
Demag has production facilities in Germany; Ningbo, China; and in Chennai, India;, and in particular has a solid position in Europe, Sumitomo said.
``In addition to its strong presence in Europe, Demag's sales channels are located within the emerging markets, such as Eastern Europe and Russia,'' the Japanese company said. ``In Europe, [the] electric molding machine is prevailing and [the] present production ratio within Demag is approximately 10 percent of total sales.''
The deal will make the new company the largest injection molding machine maker worldwide by sales, surpassing Schwertberg, Austria-based Engel Holding GmbH. China's Ningbo Haitian Group Ltd. will remain the largest by number of machines.
Sumitomo said Demag Ergotech's sales in the year ended in September were 190.7 million euros ($272.1 million), up 1.3 percent from the year before, with gross profit of 43.3 million euros ($61.8 million), up 2.4 percent.
It said sales at the Van Dorn unit had plummeted, however, to 45.5 million euros ($64.9 million) in the year ended September, from 72.7 million euros ($57.3 million) the year before. Gross profit similarly fell, to just under 1 million euros ($1.4 million), from 12.7 million euros ($10 million) in 2006.
Sumitomo's Plastics Machinery Division is based in Chiba City, Japan.
Vink is Dusseldorf, Germany-based senior editor of European Plastics News, a sister publication of Plastics News.