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Nikkei Markets

Sime Darby to buy Heavy Maintenance Group for $41.13 million

Purchase of Australian company to help add capacity, expand service offerings

Sime Darby's acquisition of Heavy Maintenance Group will allow the company to accept more orders in Australia where an uptick in the mining sector has boosted demand for its industrial equipment.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysian automotive-and-industrial company Sime Darby said Tuesday it plans to acquire Australia-based Heavy Maintenance Group, or HMG for 58 million Australian dollars ($41.13 million), in a deal that will broaden overseas footprint and add to its capacity.

The acquisition of HMG would complement Austchrome, its existing cylinder refurbishment and chroming business in Mackay, Sime Darby said in an exchange filing. The deal is expected to be closed by year-end and requires approval from the Australia's Foreign Investment Review Board, it said.

"The acquisition of HMG builds geographic coverage by combining our Mackay capability with those of the HMG facility in Brisbane," Sime Darby said. "Employees of HMG will remain employed by the company as it transfers to new ownership."

Shares of Sime Darby rose and outperformed the broader market after the announcement. The acquisition of HMG is the latest corporate action since the demerger of its plantation and property businesses in December 2017.

In July, the company announced it was selling its China-based water management business, Weifang Sime Darby Water Management to a Chinese state-owned company for $68 million to rebalance its portfolio and focus on its core businesses.

Analysts said the latest acquisition will allow Sime Darby to accept more orders in Australia where an uptick in the mining sector has boosted demand for its industrial equipment after years of downturn.

"Sime Darby is seeing a pick-up in orders for Caterpillar equipment in Australia," said TA Securities analyst Abel Goon. "This deal will add to its capacity to provide the full package of services to the clients as this company is involved in the maintenance of heavy machineries."

HMG specializes in the manufacture, refurbishment and surface finishing of equipment components in Australia and in Asia. HMG services the mining, oil and gas and other heavy industries.

"We are very pleased to have retained HM1G's strong management team and look forward to working with HMG to continue building its leadership in the mining cylinder refurbishment market as well as drive growth in the oil and gas sector," Sime Darby added.

Sime Darby rose 1.9% to 2.20 ringgit in Malaysia on Tuesday, while the benchmark FTSE Bursa Malaysia KLCI ended 0.1% higher.

--Jason Ng

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