Volvo to acquire Ingersoll Rand road development division
VOLVO have taken a significant step in their planned expansion into the road construction market by reaching agreement with Ingersoll Rand to acquire the assets of the US-based company’s road development division, one of the world’s leading manufacturers of heavy equipment for road construction and soil compaction, for US$1.3 billion (£665 million).
Based in Shippensburg, Pennsylvania, and with manufacturing units in the US, Germany, India and China, Ingersoll Rand Road Development employ over 2,000 staff and in 2006 reported sales of US$864 million (£440 million) and an operating income of US$101 million (£51 million).
The acquisition includes the division’s full range of heavy compactors, asphalt pavers and milling machines, as well as materials-handling equipment. The purchase also includes 20 dealerships in North America and distribution companies in Europe and Russia.
By strengthening their presence in this market, Volvo CE say they are aiming to take advantage of favourable growth possibilities in the global market for road construction equipment, which is currently worth around US$4 billion (£2.04 billion) annually and is projected to grow substantially as a result of increased investments in infrastructure globally.
The acquisition is also expected to strengthen Volvo’s position in the market for materials-handling equipment in North America, as well as leveraging sales of their compact equipment.
Commenting on the deal, Tony Helsham, president of Volvo Construction Equipment, said: ‘Strategically, the acquisition of Ingersoll Rand Road Development fits exceptionally well with our current motor-grader operations and positions Volvo as a full-range manufacturer of heavy road construction equipment. The purchase also fits very well geographically and provides attractive growth possibilities by capitalizing on the common dealer network in North America, Europe and Asia.’
The acquisition is expected to generate synergies at operating income level, mainly attributed to sales and distribution, estimated at around SEK600 million (£43 million) annually within a five-year period. Closing of the transaction is anticipated during the second quarter of 2007, subject to relevant approvals.
