King & Wood joins US and Euro firms on China-German manufacturing deal

King & Wood Mallesons, German firm Hengeler Mueller and Paul Hastings advised Chinese automotive and equipment manufacturing company Weichai Power on its €738m (£584m) investment in German forklift truck maker Kion Group, which was represented by Freshfields Bruckhaus Deringer and Gleiss Lutz.

Weichai Power, dual listed in Hong Kong and Shenzhen, turned to longstanding adviser King & Wood Mallesons for its second European acquisition in one year. In January this year, the company acquired a controlling interest in Italian luxury yacht maker Ferretti Group through a total investment of €374m. Legacy King & Wood was the company’s PRC adviser. Beijing-based partner Xu Ping led the firm’s team in both transactions.

German firm Hengeler Mueller acted as Weichai Power’s German legal counsel. It is the first time the firm has worked for the Chinese company, having been introduced to the client by King & Wood Mallesons. The firm assembled a 16-lawyer team across four offices to advise the client. The team was led by Düsseldorf-based M&A partners Wolfgang Meyer-Sparenberg, Christian Möller and Maximilian Schiessl.

Paul Hastings’ Frankfurt office also played a role in the transaction, acting for Weichai. The lead partners were Frankfurt M&A based Christopher Wolff, Regina Engelstader, Ali Sahin and Jan Gernoth.

The three firms worked closely with Weichai’s in-house legal department, headed by general counsel Jeffrey Chen.

Kion turned to German firm Gleiss Lutz and Freshfields for advice in relation to the transaction. Gleiss Lutz’s transaction team was led by Frankfurt partner Jan Bauer, while Freshfields fielded Cologne-based tax partners Stephan Eilers and Norbert Schneider.

Under the terms of the agreement, Weichai will invest a total of €738m to acquire a 25% stake in Kion via a capital increase and a 70% majority stake in Kion’s hydraulic business, Linde Hydraulics.

Möller, who chairs Hengeler’s China desk, said: “The deal is significant, not only because it is one of the largest direct investments by a Chinese company in Germany, but also because of its complex structure. The several layers of investment is the novelty of the deal. Weichai is at the forefront of Chinese investment in Europe. This deal sets a good example for more Chinese companies to follow.”

The deal was signed shortly after German chancellor Angela Merkel met with Chinese premier Wen Jiabao in Beijing on 31 August, calling for more bilateral investment.

Background to this deal:

In Weichai’s €374m acquisition of a controlling interest in Italy’s Ferretti Group in January this year, the company turned to Italian firm Bonelli Erede Pappalardo for advice. The firm is a member of Slaughter and May’s best-friend network in Europe, in which Hengeler is also a member. US firm Akerman Senterfitt was also engaged by Weichai in this transaction. Ashurst and Clifford Chance acted as legal advisers to RBS and Strategic Value Partners, which are assisting Ferretti in restructuring its financial debts with a recapitalisation.