Doosan Infracore to Buy Ingersoll-Rand's Bobcat Unit

July 30 (Bloomberg) -- Doosan Infracore Co., South Korea's largest maker of construction machinery, agreed to buy Ingersoll-Rand Co.'s Bobcat and other earth-moving equipment units for $4.9 billion in the country's biggest overseas acquisition.

The combined businesses had about $2.6 billion in sales last year and make small loaders, excavators and forklifts, Incheon-based Doosan Infracore said in an e-mailed statement today. Shares of the company closed at a record high.

Doosan Infracore will pay 1.9 times sales, compared with a value of 1.2 times for Caterpillar Inc., the world's biggest maker of earthmoving machinery. Ingersoll-Rand, based in Hamilton, Bermuda, sold the units to focus on its operations which make products including Thermo King refrigerated trucks and Club Car golf carts.

``The acquisition will help Doosan Infracore become a more globalized company with a worldwide network,'' said Song Jae Hak, an analyst at Woori Investment & Securities Co. in Seoul.

The purchase is the second biggest in the industry behind last year's 4 billion-euro ($5.5 billion) acquisition of the Kion Group, a maker of forklifts, by Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc., according to Bloomberg data.

Doosan Infracore, which is setting up a company with Doosan Engine Co. to lead the acquisition, will raise $700 million and the new company will borrow the rest and repay the loans from its cash flow, the buyer said. The company is part of Doosan Group, which gets $15 billion in annual sales building power stations and engines, operating restaurants and publishing GQ magazine in South Korea.

Three Units

Ingersoll-Rand said May 15 it may sell or spin off Bobcat to exit construction-related operations and focus on its three other units: cooling, industrial and security operations. Revenue at Bobcat fell 9 percent in the second quarter on a slump in equipment sales in North America.

Shares of Ingersoll-Rand jumped $3.63, or 7.5 percent, to $51.77 at 4 p.m. in New York Stock Exchange composite trading. They have gained 45 percent in the past year. Ingersoll-Rand is run out of Montvale, New Jersey.

Shares of Doosan Infracore rose 15 percent to 37,000 won in Seoul, their steepest gain since May 19, 2004. The number of shares traded today was more than three times the full-day average of the past year. The stock has risen 76 percent this year, more than twice the pace of the 33 percent climb in South Korea's Kospi index.

Increased Sales

The acquisition will increase Doosan Infracore's sales to about 7 trillion won ($7.6 billion) this year compared with a previously expected 4.4 trillion won, the South Korean company said. Sales of construction equipment account for about 35 percent of Doosan Infracore's total. It also makes industrial vehicles, machine tools and engines and estimates the annual global market for its products at about 174 trillion won annually.

The takeover will enable Doosan Infracore to move into the market for machinery of less than 5 tons, a segment from which it is almost absent. It adds to the company's acquisitions in the U.S. and China this year as it aims for a top-five spot in the construction-machinery industry by 2010 from 19th now. After the acquisition, it will rank seventh.

Other Acquisitions

Doosan Group, whose chairman is a member of the International Olympic Committee, has been taking over companies since 2000 and is one of South Korea's 10 largest conglomerates. It bought Doosan Heavy Industries & Construction Co. in 2001 and Doosan Infracore in 2005, the two biggest contributors to the group's sales. It also bought Daewoo Heavy Industries and Machinery in April 2005, and created Doosan Infracore America, which has 70 dealers with more than 130 locations.

Doosan Infracore, established in 1937, has plants in South Korea, China and Belgium and is building one in India. It is the biggest seller of excavators in China, with about 20 percent of the market, the company said. Sales from South Korea and China account for more than half the company's total revenue.

``Doosan Infracore's strong position in Asia-Pacific markets will provide the acquired businesses significant growth opportunities,'' Ingersoll-Rand Chief Executive Officer Herbert Henkel said in the statement.

In February, Ingersoll-Rand agreed to sell its road- building-equipment unit for $1.3 billion to Volvo AB, the world's second-largest truck maker. That disposal and the sale of Bobcat and the related units to Doosan Infracore will generate gross proceeds of more than $6.2 billion, Ingersoll- Rand said today.

Share Buyback

The funds will be used for acquisitions to enhance the geographic presence, product lines and manufacturing capabilities at existing operations, Ingersoll-Rand said. The company also plans to buy back about $1.29 billion worth of stock in the third quarter.

``Management will likely pursue a formal share repurchase program, rather than sit on the cash for an extended period,'' Ann Duignan, an analyst with Bear Stearns Cos. in New York, wrote today in a note to investors. She has an ``outperform'' rating on the shares and doesn't own any.

Credit Suisse Group, Goldman Sachs Group Inc. and Simpson Thacher & Bartlett advised Ingersoll-Rand. Doosan Infracore was advised by Citigroup Inc., Kim & Chang and Paul & Weiss. Korea Development Bank will be in charge of the financing. The deal is scheduled to close early in the fourth quarter.