Sumitomo to purchase Demag: report

Tokyo-based Sumitomo Heavy Industries Ltd has reached a broad agreement to buy injection molding machine manufacturer Demag Plastics Group (DPG) of Germany for what is believed to be more than 10 billion yen (US$91.92 million), according to a report from the Nikkei business daily.

Sumitomo was expected to buy all Demag shares from an unidentified U.S. fund, the newspaper said, adding that the parties intend to finalize the deal by the end of March.

The report comes on the heels of a joint statement issued by the machinery companies late last week that confirmed “talks regarding the acquisition of Demag by Sumitomo have occurred”.

The proposed acquisition involves both Demag Ergotech and its US subsidiary in Strongsville, Ohio. DPG has a facility in Schwaig producing large machines and one in Wiehe producing small machines and while production in the US ceased least year its sales operation continues. It also has a facility at Ningbo, China, and at its joint venture L&T-Demag Plastics Machinery at Chennai in India.

Sumitomo Heavy would take advantage of the German firm’s brand name and production facilities in China and India in a bid to boost its capacity to supply products to emerging markets, Nikkei said.

DPG is presently owned by the private equity investment company Madison Capital Partners, having been acquired by Madison with the rest of the Mannesmann Plastics Machinery (MPM) group in July 2006.