The Light Is Green: Volvo and Ingersoll Rand take opposite paths: Part 2

A recent post talked about how Volvo Construction and Ingersoll Rand, two of the world's major construction equipment manufacturers, were taking completely divergent paths in their quest for improving results.

Volvo's decision has been to consolidate and focus on their two main divisions, trucks and heavy equipment. Meanwhile, Ingersoll Rand has decided the opposite as they try to diversify and shift to various industrial activities, such as refrigeration equipment, security, and others.

So now, it should come as no surprise to see that Volvo Construction is buying the Road Development division of Ingersoll Rand for $1.3 billion in cash.

Ingersoll's Road division currently makes dump trucks, loaders, excavators and graders. "What we are adding here is compactors, pavers and milling equipment, which makes us a full-range provider,'' said Volvo CEO Leif Johansson recently. "We are now in a clear No. 3 position.''

Ingersoll's Road Development business unit employs 2,000 people worldwide, and 2006 revenue was $850 million.

The deal includes plants in Pennsylvania, USA; Hameln, Germany; Wuxi, China; and Bangalore, India. Also included are Ingersoll Rand's 20 existing dealer relationships in the United States.

The two sides had this to say about the aptness of the transaction:

Says Herbert L. Henkel, president and CEO of Ingersoll Rand: "... the business' markets and products do not fit within our transformed portfolio of diversified industrial businesses. I am confident that Road Development will benefit by joining a company sharing similar competencies and offering complementary products and services."
Tony Helsham, president of Volvo Construction Equipment: "Strategically, the acquisition of Ingersoll Rand Road Development fits exceptionally well with Volvo's current operations within motor graders and positions Volvo as a full-range manufacturer of heavy road construction equipment."

In addition, Volvo says the transaction will save it $85.2 million dollars over the next five years. "The acquisition gives Volvo Construction Equipment a world-leading position within heavy road construction equipment," said Volvo CEO Leif Johansson.