Hyundai Heavy Industries Embracing Doosan Infracore "Synergy with Hyundai Construction Equipment, Targeting China"

Signed the main contract today after 2 months

Doosan Infracore Ultra-large Excavator DX800LC

[Asia Economy Reporter Choi Dae-yeol] Hyundai Heavy Industries Group will sign the main contract to acquire Doosan Infracore, the No. 1 construction machinery company in Korea, on the 5th. This comes just over two months after the Hyundai Heavy Industries Holdings consortium was selected as the preferred bidder in early December last year. The company's goal is to create synergy with Hyundai Construction Equipment within the Hyundai Heavy Industries Group and increase market share in overseas markets such as China.

A Hyundai Heavy Industries Holdings official said, "We previously extended negotiations once and decided to proceed until today," adding, "We expect to finalize and announce the related details by this afternoon." Earlier, the Hyundai Heavy Industries Holdings and KDB Investment consortium had been negotiating to trade shares and new share subscription rights of Doosan Heavy Industries and Doosan Infracore. Although the deal was initially planned to be completed by the end of last month, it was delayed by a week due to paperwork. Since it is necessary to maintain existing distribution networks in key markets such as China, the two-company system will be maintained.

According to International Research and the Industrial Research Institute, Doosan Infracore ranks ninth globally in the construction machinery industry. Its market share is estimated at about 3.7% (based on 2018). Hyundai Construction Equipment holds about 1.5%, ranking around 20th. If simply combined, their market share would be similar to that of Volvo Construction Equipment, ranked fifth with 5.2%. Considering that the top two global companies, Caterpillar (USA, 12.6%) and Komatsu (Japan, 11.9%), are followed by other leading companies with market shares around 5%, it is expected that their global market presence will expand.

As the scale grows after the merger, advantages will arise in parts procurement contracts, and sharing overseas sales networks will become easier. However, there are concerns that product lines overlap somewhat between Hyundai Construction Equipment and Doosan Infracore, and neither company has large or special-purpose equipment product lines such as cranes or drilling machines, indicating a need for portfolio diversification. The company expects to expand its product lines through research and development (R&D).

The company forecasts that global demand for construction equipment, which showed a slight increase last year, will grow by about 1-7% this year as well. The increase in demand despite the COVID-19 pandemic is largely influenced by China. The construction equipment market in China was sluggish in early last year but then grew significantly, estimated to have expanded by 40% last year. It is expected to continue growing by about 5% this year. Doosan Infracore already has strong excavator sales in China, and Hyundai Construction Equipment is also making efforts such as production partnerships with local companies. Demand is likely to increase steadily in emerging markets such as India, the Middle East, and Africa, as well as in North America and Europe due to economic stimulus measures, increased construction orders, and rising mineral prices.

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