Hyster-Yale to Acquire 75% of China’s Zhejiang

Hyster-Yale Materials Handling has entered into a definitive agreement to acquire, through an indirect wholly-owned subsidiary, 75 percent of the outstanding shares of, and a controlling interest in, Zhejiang Maximal Forklift Company Limited from KNSN Pipe and Pile Company Limited for an aggregate purchase price of $90 million, funded using Hyster-Yale’s cash on hand.

The remaining 25 percent share of the new company, which will be named Hyster-Yale Maximal Materials Handling Co., Ltd. (“HY Maximal”), will be owned by current Zhejiang Maximal Forklift (“Maximal”) senior management through Y-C Hong Kong Holding Company Limited.

Maximal, a privately-held, Chinese OEM for utility and standard lift trucks and specialized material handling equipment founded in 2006, is involved in the design, manufacture, service and distribution of Class 1 electric and Class 5 internal combustion engine counterbalance utility and standard platforms, and Class 2 and Class 3 electric warehouse products in both the local China and global markets under the Maximal and SAMUK brands.

Maximal also designs and produces specialized products in the Port Equipment and Rough Terrain forklift segments. Maximal has nearly 600 employees, and its 133,000 square meter facility in the Lushan Industry Area near Hangzhou, approximately 200 miles southwest of Shanghai, has a current production capacity of 30,000 units.

The proposed transaction is a strategic action that is expected to expand the Company’s low-cost, global manufacturing capabilities, develop access to competitive component sourcing, further strengthen Hyster-Yale‘s utility and standard product portfolio by adding a wider spectrum of products to an already leading global materials handling business, and enhance the Company’s presence in both the China market, as well as in the growing global utility and standard market segments.

Although Hyster-Yale has been in the China market for a number of years, the Company’s market share has been limited and focused in the more premium segments. Maximal has achieved success in the utility and standard segments in this region, and this joint venture will allow Hyster-Yale to start reaching this expanded customer base.

This is especially important for strengthening Hyster-Yale’s current China operations, which are operating on a scale below the level needed for long-term success. For the year ended December 31, 2016, Maximal had revenues of 482.63 RMB or approximately $66.3 million, with domestic and export volume of nearly 6,000 units.  Bookings and revenues in 2017 have increased nearly 20% over 2016.  Due to the investments that Hyster-Yale intends to make in the joint venture, the proposed acquisition, while currently profitable, is expected to be dilutive to the Company’s earnings in 2018 by $5 million to $10 million pre-tax due to additional investments in expense and capital needed to implement the Company’s integration plan.

The acquisition is expected to move toward being accretive in the medium term under conservative market share and synergy objectives.

The closing of the transaction, which is expected to take place during the first half of 2018, is subject to customary closing conditions and required regulatory approvals.  There can be no assurance that all conditions will be met, that the acquisition of Maximal will occur or that the anticipated benefits and effects of the transaction will be realized.

Following the closing, HY Maximal will be a subsidiary of Hyster-Yale, but is expected to continue to operate as a separate entity within Hyster-Yale’s JAPIC segment, with its own management team and Board of Directors. Hyster-Yale will hold six seats on the HY Maximal Board of Directors and Y-C Hong Kong Holding Company Limited will hold three seats.

Hyster-Yale will appoint the HY Maximal Chairman.  Mr. Lu JinHong, Maximal’s current Chairman, will be appointed as HY Maximal’s Chief Executive Officer following the completion of the transaction.  Mr. Lu JinHong and his existing team have worked together for over 10 years to build Maximal into a successful Chinese forklift OEM.

Commenting on the transaction, Mr. Lu JinHong, Chairman of Zhejiang Maximal Forklift Company Limited said, “I am proud of the growth of Maximal, thanks to the great professionalism of the people that contributed to it and to the strong dedication to our customers. This transaction starts a new chapter in our history and I am delighted that we will continue to be run as a separate company as part of Hyster-Yale. In the course of our discussions it has been very interesting to find that there are significant similarities between Maximal and Hyster-Yale. While the products, the history, and the knowledge developed at Maximal are different, they are at the same time similar to those of Hyster-Yale so much so as to make a complementary creation of value possible.  These are the premises which are expected to lead to a successful combination.”

Colin Wilson, President and Chief Executive Officer of Hyster-Yale Group, Inc. said, “Maximal is well-known as a reliable manufacturer of global utility and standard forklift trucks and specialized material handling equipment. We look forward to meeting our customers’ needs more effectively by broadening our product offerings as a result of this transaction. Maximal’s historical strength is in China, the world’s largest market and where we want to expand. We also believe this acquisition will increase our participation in the global lift truck market and, therefore, allow us to further expand our global share and earnings in both the China and global utility and standard market segments as a result of the addition of Maximal’s existing portfolio of established Chinese brands, a broad competitive utility and standard product line-up and a local and global distribution network.”

Hyster-Yale Materials Handling is an independent public company which, operating through its subsidiary, Hyster-Yale Group, Inc. and its subsidiaries, designs, engineers, manufactures, sells and services a comprehensive line of lift trucks and aftermarket parts marketed globally primarily under the Hyster and Yale brand names.

“This acquisition will allow us to establish a larger production and sourcing foundation in China, leveraging Maximal’s low-cost manufacturing operation, utilizing Maximal’s excess capacity by bringing the design and production of our global utility product in-house and leveraging the low-cost supply chain in China to support the design and manufacture of standard and utility products that complement our current standard and premium products. We also believe that by building on Maximal’s existing local strengths, we can leverage our expertise in manufacturing technology, product development, sales processes and distribution to realize synergies and additional capabilities that will enhance our ability to deliver a full range of economic solutions to meet global customer needs and further achieve our strategic initiatives, including ‘Focusing on Increased Success in Asia,’ ‘Enhancing Understanding of Customer Needs’ and ‘Driving for Lowest Cost of Ownership,’ as well as accelerate profitable share growth to achieve our financial objectives.  In considering this acquisition, we were attracted to Maximal’s solid financial history and performance, along with the quality of their products,” said Mr. Wilson.