LiuGong Machinery Corp., the premier, global construction equipment manufacturer based in Liuzhou, China, has finalized its agreement to acquire HSW (Huta Stalowa Wola) and its distribution subsidiary, Dressta Co, Ltd., company executives announce. The agreement was signed by both companies’ executives in Warsaw with celebration ceremonies following at the Baranów Sandomierski Castle in Baranów Sandomierski, Poland.
David Beatenbough, currently Vice President of Research and Development for LiuGong, has been named Chairman of the Board of the new entity, LiuGong Machinery (Poland) sp z o.o. The transaction is LiuGong’s first outright acquisition outside its domestic market.
HSW is a respected producer of bulldozers and other crawler machines. It is one of only seven manufacturers worldwide producing a complete line of bulldozers, from 74 hp to 520 hp. The Polish government was the primary owner of HSW. It agreed in principal to sell to LiuGong earlier this year with the signing of a preliminary enterprise acquisition agreement in Beijing, China.
The formal contract ceremonies set at a prominent castle and landmark in Poland reflected the importance of the transaction for both the companies and the two countries. The events, a signing ceremony and press conference, followed by a full banquet, and tours of HSW facilities a day later, were attended by high level government officials of both Poland and China. Presiding dignitaries included Poland’s Minister of Treasury, Mikolaj Budzanowski; Chairman of the Poland Industrial Development Agency, Wojciech Dabrowski; Sun Yuxi, the Chinese Ambassador to Poland; Zeng Guang’an, Vice Chairman and President of Guangxi LiuGong Co. Ltd. and Krzysztof Trofiniak, Chairman of the Board and General Director of HSW.
"I’m pleased to be a part of this historic occasion bringing two great companies, and two great brands together,” says Zeng Guang’an. “This deal further solidifies the strong ties between our two countries, as Poland and China are long term trading partners and we have more than 60 years of excellent relations. This agreement signals a new era of expansion for both LiuGong and HSW."
HSW Chairman Krzysztof Trofiniak says the new partnership is the right move for both companies, leveraging Chinese efficiency and European technology.
“Both companies have a long and rich history, a passion for quality and excellence, and a deep desire to create success for employees, dealers and customers. Through this formula, we want to create opportunity for everyone who associates with us,” says Trofiniak.
After announcing its intent to acquire HSW last March, negotiations for the agreement continued during the summer and fall, as LiuGong reached an agreement regarding wages and job security with the Polish Workers Union and completed the commercial terms of the transaction with HSW.
“Our gaining and retaining the technical knowledge and skills of the HSW employees was important to us in this agreement,” says Beatenbough. “It is still important for us to remain competitive in our markets, and this agreement lets us do that.”
LiuGong’s acquisition of HSW represents a smart strategic step for the company, which has a publically stated goal of becoming a top 10 construction equipment manufacturer by 2015.
In the transaction, LiuGong obtains core technologies that will help it advance some of its product designs; supplements LiuGong’s already expansive product lines; provides a manufacturing and logistic footprint in Europe; and expands LiuGong’s penetration into markets and products segments. LiuGong already offers a full line of high quality machines to world markets. LiuGong has among the most expansive array of product lines of any Chinese manufacturer, including wheel loaders, bulldozers, skid steers, forklifts, motor graders, excavators, rollers, drilling machines, truck mounted and crawler cranes, pavers, cold planners, concrete equipment and mining dump trucks.
HSW was established in 1937 and is well known for manufacturing high-quality crawler dozers at its plant in the Podkarpackie province in southwestern Poland. HSW also produces wheel loaders, loggers, pipe layers, conveyer belt shifters, motor graders and machines customized for landfill applications, also for global markets.
Beatenbough, one of the key architects of the acquisition, discussed how HSW will fit into LiuGong’s plans and product lines.
“We will acquire proven technology within the bulldozer segment, as we will now own all the technology and designs, including undercarriages and driveline components,” Beatenbough says. “HSW machines have a long and respected design history reaching back to International Harvester, which was an early developer for the track-type undercarriages that presaged construction equipment as we know it today." He says LiuGong will benefit from HSW’s experience with large model machines
Beatenbough notes LiuGong will also benefit from HSW’s plant location in central Europe, closer to its European customers, without undertaking a long, expensive construction project. The value of a skilled workforce experienced in the manufacture of quality construction equipment cannot be underestimated; much of the learning curve that would be required in a Greenfield project goes away. In addition, he says, LiuGong will gain HSW Dressta’s distributor and dealer network, which is largely complimentary to LiuGong’s global dealer network.
With the transaction now complete, LiuGong will move rapidly to integrate processes and production. A talent exchange will bring Chinese engineers to Poland, and send Polish engineers to China for training. The first fast-track project will be an investment into production line equipment and re-tooling at the Podkarpackie plant, enabling it to produce LiuGong excavators and wheel loaders as quickly as possible.
Though unable to provide specifics, Beatenbough says the plant is expected to increase its overall production capacity, which in turn, will increase its purchasing requirements for raw materials. Work on this begins immediately.
“It’s important to note that we will be a part of the community in Poland,” Beatenbough says. “We will be a contributor to the economy and a partner in the community. As markets grow, we will continue to expand there.”
LiuGong will move rapidly to leverage the combined distribution network to bring the expanded product line to dealers – HSW products to LiuGong dealers, and LiuGong products to HSW/Dressta dealers. Relative to brand names, Beatenbough says, for the near term all three brands will be retained in certain markets.
He was upbeat about the complementary strengths of the two companies.
“HSW is known for its sophisticated process methodologies, while LiuGong prides itself on its flexibility, speed and adaptability. When we put the best of these two philosophies together it’s a powerful combination,” Beatenbough says.