The largest direct Chinese investment in Germany that was announced last August is set to expand after the China Development Bank agreed to lend up to EUR500 million (USD643 million) to support the partnership.

Weichai Power Co Ltd, a leading Chinese automotive and equipment manufacturer and a part of Shandong Heavy Industry Group, and KION Holding 1 GmbH (KION Group) implemented their partnership on 27 December 2012 (Forkliftaction.com News #581).

In the presence of German chancellor Angela Merkel and Chinese prime minister Li Keqiang, representatives of the two partners and of China Development Bank, China's largest outbound investment and financing bank, signed a framework collaboration agreement last Sunday.

The three parties agreed that Weichai Power and KION Group will intensify their co-operation through mutually agreeable means, and that China Development Bank will provide a full range of financial services including financing of up to EUR500 million (USD643 million) to support the expanded collaboration.

Weichai Power, through its Luxembourg-based subsidiary Weichai Power (Luxembourg) Holding Sàrl, currently holds a 25% stake in the KION Group and has a call option to increase its shareholding in KION to 30% on a fully diluted basis, upon the completion of a potential future IPO of KION Group.

Weichai Power holds a further option to acquire an additional 3.3% stake in KION from Superlift Holding Sàrl, Luxembourg, a company controlled by funds advised or controlled by Goldman Sachs and KKR.

Tan Xuguang, chairman and CEO of Weichai Power, says: "We are very happy that China Development Bank will provide the financing to support Weichai Power's investment in and collaboration with KION Group. Our equity investment and call options for more shares in KION Group will demonstrate our strong commitment to the common goals of KION Group and Weichai Power."

KION Group CEO Gordon Riske says the "highly welcome expansion" of the group's long-term strategic partnership will be an additional catalyst for its strategy to continuously expand its forklift business in the growing Asian markets. "The partnership with Weichai Power and the spirit the two partners share provide exciting opportunities to leverage on our successful growth strategy. Our teams have already started to implement a close strategic collaboration."

KION's strategic partnership with Weichai Power provides additional access to key Asian growth markets, as it will leverage Weichai's strong local roots and relationships. KION will also have access to a larger supplier base in China and Europe.

In 2012, Weichai invested a total of EUR738 million (USD948 million), including EUR467 million (USD600 million) for the acquisition of a 25% stake in KION through a capital increase and EUR271 million (USD348 million) paid to Linde Material Handling GmbH to acquire its 70% majority stake in Linde Hydraulics.