Volvo world's 3rd largest construction equipment maker after buy of IR road ops |
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Tue, 27 Feb 2007 15:59
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STOCKHOLM (AFX) - AB Volvo's chief executive Leif Johansson said the company's acquisition of US Ingersoll Rand's road construction business will make Volvo's Construction Equipment (CE) business the third largest in the world, after Caterpilar and Komatsu, with annual sales of 6.4 bln usd.Johansson said the deal will create synergies of 600 mln skr per year within 5 years. Two thirds of these will come from shared distribution, particularly in North America, and a third from cost rationalizations.The acquisition will have a neutral effect on Volvo's earnings per share in 2007, but have a positive effect from 2008 onwards when synergies start to take effect, Johansson said at a press conference.Ingersoll Rand's road construction business currently has an operating margin of about 11.7 pct, but has previously managed margins as high as 14 pct, Volvo's management said.Volvo's chief financial officer Per Ostberg said the acquisition will bring with it 6 bln skr of intangible assets, of which some 40 pct or 2.5 bln skr will be depreciated, at the rate of about one tenth a year, over 10 years.He cited IR's engine designs plans as an example of an intangible asset which will be depreciated.Although the North American market for road construction equipment may 'slowdown' in 2007, it is expected to bounce back to its more normal annual growth rate of 4.0 - 4.5 pct thereafter, said the company.simon.richardson@thomson.comsjr/rfwCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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Volvo to acquire Ingersoll Rand's road development division for 1.3 bln usd 