Hubertus Krossa

Linde AG has sold its forklift business to a consortium of financial investors, Kohlberg Kravis Roberts & Co (KKR) and Goldman Sachs Capital Partners, for EUR4 billion (USD5.082 billion).

The price consists of EUR3.6 billion (USD4.574 billion) in net equity value and EUR400 million (USD508.2 million) of net financial debt. The sale agreement was signed last Sunday and is pending approval by competition authorities.

A Linde statement said the consortium would honour all agreements "on safeguarding locations" made by the Linde executive board and employee representatives in the northern hemisphere summer of 2005 (Forkliftaction.com News #220).

KKR head of European operations Johannes Huth and Goldman Sachs head of central & eastern Europe Alexander Dibelius said in a joint statement that Linde's forklift business, Kion Group, had excellent prospects and praised the group's employees.

"In the medium term, our objective is an initial public offering," they said.

Kion management board chairman Hubertus Krossa said he was delighted the group had found "strong partners" that supported Kion's industrial concept.

KKR was established in New York in 1976. It has completed more than 140 acquisitions valued at USD215 billion. The transactions, as of June 30, 2006, have created USD68 billion in value on USD26 billion in capital investment.

Since 1986, Goldman Sachs has invested more than USD17 billion of equity in more than 500 companies globally.

Private equity companies like KKR and Goldman Sachs account for a significant proportion of global M&A activity. Their modus operandi is buying underperforming companies, managing them for growth, revitalising the business through cost-cutting and acquisitions, and eventually selling or floating the business.

KKR is credited by Harvard Business School as a pioneer in leveraged buyout (LBO) transactions after acquiring Orkin Exterminating Company in 1964. An LBO is the acquisition of another company financed through debt that often will be moved down to the balance sheet of the acquired company. Assets of the company, in addition to assets of the acquiring company, are often used as collateral for the loans.

Dow Jones International News reported that KKR-Goldman's winning bid was "slightly ahead" of other bidders, Permira-Allianz Capital, CVC Capital, and BC Partners and Apax Partners.

The report said two unique limitations to the tender required the debt portion of the offer to not breach EUR2.6 billion (USD3.321 billion), as stipulated by a financing package deal offered by Linde's financial adviser Credit Suisse. Bidders had to agree not to release any equity from the business for a set period.

Goldman Sachs spokesperson Alexander Geiser told Dow Jones the company's growth strategy for Kion included injecting fresh capital should takeover possibilities arise.

"2010 to 2012 is a realistic timeframe [for an IPO] for Kion," he said.

Kion Group is the Linde Group's new holding company for its three forklift brands, Linde, Still and OM. Combined, the forklift businesses employ more than 20,000 people. In fiscal 2005, Kion achieved sales of EUR3.6 billion (USD4.574 billion) (Forkliftaction.com News #276). The Linde Group had been trying to sell its forklift unit since buying BOC Group plc (Forkliftaction.com News #259).