The deal will help the firm to make inroads into the European market

BEIJING - China National Machinery Industry Corp (Sinomach), the biggest machinery manufacturer in China, has acquired the agricultural machinery-parts maker, McCormick France SAS. The deal - worth 8 million euros ($11.19 million) - was made through a Sinomach subsidiary, as the company aims to strengthen its dominant position in the domestic high-end tractor market.

The deal may also provide an important inroad into the profitable European market, as Sinomach will manufacture tractors under its "Dongfang Hong" brand in France, according to an announcement posted on the website of the State-owned Assets Supervision and Administration Commission.

Those tractors will be distributed directly to the European market, which will bypass some trade barriers, according to the announcement.

YTO Group Corporation, Sinomach's agricultural machinery subsidiary, conducted the acquisition.

The deal means that YTO will be able to upgrade its tractor-making technology and gain a larger share of the Chinese high-end tractor market, the announcement said.

Ren Hongbin, Sinomach's chairman, said management team issues are a major concern when Chinese companies make global mergers and acquisitions.

"A successful deal is a joyful thing, but between the joy and the pressure from the challenge, I feel the latter most," Ren told China Daily.

"When a manufacturing company such as YTO operates overseas, various challenges emerge, including language, management and how to work well with local labor unions. However, since we made the first step, we should continue," Ren said.

Sinomach, which is the parent company of several major manufacturers of agricultural machinery in China, plans to realize annual sales of 50 billion yuan ($7.1 billion) in the sector by the end of the 12th Five-Year Plan (2011-2015) period.

In addition to the Henan-based YTO Group Corporation, Sinomach also owns companies and institutions such as Luoyang Zhongshou Machinery Equipment Co Ltd and the Chinese Academy of Agricultural Mechanization Sciences.

China Daily

(China Daily 03/23/2011 page14)