KKR takes ownership of Demag and Gottwald

16 September 2002

Demag Cranes & Components and Gottwald Port Technology have been sold by Siemens to US private equity investor Kohlberg Kravis Roberts & Co (KKR).

The two companies, formerly part of Mannesmann Dematic, are among seven businesses that Siemens has sold to KKR for a total of e1.69bn.

KKR said that although the seven are owned by a common holding company formed for this acquisition, each business will be managed separately. KKR owns 81% of the new holding company, called Demag Holding s.a.r.l. (Luxemburg), with Siemens retaining a minority stake of 19%.

The businesses being acquired, which have a combined turnover of e3.5bn, are:

• Demag Cranes & Components (DCC), described by KKR as the largest worldwide designer and manufacturer of cranes and crane accessories for industrial applications. DCC has earnings before interest and taxation of about e50m

• Gottwald Port Technology, a supplier of harbour logistics solutions

• Mannesmann Plastics Machinery AG (MPM), a leading producer of injection moulding and extrusion machinery for plastics manufacturing

• Stabilus, a producer of gas springs and hydraulic dampers

• Network Systems, a provider of network integration services in the UK, France and Italy

• Metering, a manufacturer of electricity and heat meters

• Ceramics, supplier of technical ceramics.

KKR said that its London office had been in exclusive negotiations with Siemens for six months.

Johannes Huth, managing director of KKR in London, said: "This portfolio of companies provides a unique opportunity to acquire businesses with solid franchises and experienced management teams in a range of markets. Each business is a market leader and we believe there are considerable opportunities to work with the incumbent management and to continue to build the individual businesses." Completion of the transaction is subject to necessary regulatory approvals, which are expected by the end of September. Financing for the transaction is being arranged by CIBC World Markets, HVB, and JP Morgan.

The deal substantially completes Siemens' disposal of unwanted assets acquired in the wake of Vodafone's hostile takeover of the Mannesmann group. Mannesmann Dematic and other engineering businesses were sold by Vodafone to Siemens and Bosch. To give some stability, Siemens promised to keep the crane businesses for at least three years, but soon realised how little it wanted them and put them up for sale.

In May Terex Corp agreed to buy Demag Mobile Cranes from Siemens for $150m, a deal that is expected to close in the next month or two.

KKR describes itself as one of the world's leading private equity firms. Its investment approach is "focused on investing in attractive businesses and working closely with management over the long term to design and implement value creating strategies". Founded in 1976, it has completed more than 100 transactions in North America and Europe, including nine transactions in Europe since 1996. Its current portfolio consists of 30 companies based in the USA, Canada, Germany, Austria and the UK, including Amphenol, Rockwood Specialties (acquired from Laporte plc), Tenovis (formerly Bosch Private Networks), Willis Group (formerly Willis Corroon), Shoppers Drug Mart, Alliance Imaging, Wincor Nixdorf (formerly Siemens Nixdorf), and Zumtobel.