Avi­a­tion deal

Shang­hai Elec­tric buys Ger­man group BAW for $190 mil­lion

China Daily (USA) - - FRONT PAGE - ByWUYIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

Shang­hai Elec­tric Group an­nounced it is buy­ing Ger­man avi­a­tion equip­ment man­u­fac­turer Broetje-Au­to­ma­tion GmbH for 170 mil­lion eu­ros ($190 mil­lion), a move the com­pany said would help it tap into the avi­a­tion equip­ment au­to­ma­tion and man­u­fac­tur­ing sec­tor’s tech­nolo­gies.

Shang­hai Elec­tric said on Sun­day it will also as­sume 12 mil­lion eu­ros of un­paid BAW debt un­der the terms of the ac­qui­si­tion.

The deal is sub­ject to ap­proval of over­seas and Chi­nese au­thor­i­ties, the state­ment said.

The com­pany’s Shang­hailisted shares rose 1.85 per­cent to 8.26 yuan ($1.24) on Mon­day, while the share price of the com­pany’s Hong Kong-listed sub­sidiary surged 7.03 per­cent to HK$3.5 (45 cents) per share.

BAW is a sup­plier to air­craft mak­ers and its prod­ucts and ser­vices port­fo­lio in­clude com­po­nents, as­sem­bling and sys­tem­atic so­lu­tions. Its top clients in­clude Air­bus SAS and Boe­ing Co.

The com­pany re­ported sales rev­enue of 143.6 mil­lion eu­ros for the last fi­nan­cial year to end of Septem­ber, the an­nounce­ment added.

Shang­hai Elec­tric said the deal would help it ac­quire knowl­edge, ex­per­tise, staff and in­ter­na­tional distri­bu­tion chan­nels in the field of avi­a­tion au­to­ma­tion.

The an­nounce­ment also said there were risks to the ac­qui­si­tion, in­clud­ing that the deal would not be ap­proved by au­thor­i­ties.

An­a­lysts said that in the long run, the avi­a­tion in­dus­try in China would re­tain a great po­ten­tial to ex­pand and sec­tors in­volved in the en­tire avi­a­tion sup­ply chain would ben­e­fit.

Pan Yili, an an­a­lyst at Si­no­link Se­cu­ri­ties Co, said it was es­ti­mated that the mar­ket size of the avi­a­tion sec­tor — in­clud­ing man­u­fac­tur­ing, so­lu­tion pro­vid­ing and ser­vices — could ex­ceed 1 tril­lion yuan in the com­ing decade, giv­ing play­ers in the sec­tor great op­por­tu­ni­ties to grow.

Shang­hai Elec­tric Pres­i­dent Huang Di­nan said in a ques­tion and an­swer ses­sion with in­vestors in early July that his group would in­clude au­to­ma­tion as one of its core ar­eas for fu­ture de­vel­op­ment.

He said the pro­posed de­vel­op­ment of its au­to­ma­tion side was in align­ment with the Made in China 2025 ini­tia­tive, which was un­veiled by the State Coun­cil last year in a bid to trans­form China from a man­u­fac­tur­ing giant into a world man­u­fac­tur­ing power.

Huang said that the com­pany would ac­cel­er­ate the pace of its merg­ers and ac­qui­si­tions in or­der to sharpen the com­pany’s com­pet­i­tive edge in au­to­ma­tion and smart man­u­fac­tur­ing.

Ear­lier this year, Shang­hai Elec­tric also bought a ma­jor stake of Ger­man ma­chine builder Manz AG, a high-tech equip­ment man­u­fac­turer and a leader in au­to­mated man­u­fac­tur­ing.

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