Copper: Chinese copper fabricating giant Zhejiang Hailiang enters the European market with acquisition of KME’s brass rods and copper tubes divisions

The Chinese copper fabricator Zhejiang Hailiang has entered into an agreement with KME to acquire the latter’s European brass rods and copper tubes operations, including copper tube plants in Germany and Spain and brass rod plants in Germany and Italy. Zhejiang Hailiang has also made a binding offer to acquire the French brass rod operations of the group, but not its part-owned French copper tube plant. As a result, KME will start a consulting process with its labour unions in France about this option.

The overall transaction covers a business with an annual turnover of €540M, an EBITDA of €15M and a total of around 1,100 workers. The closing deal price is €119M plus working capital and reimbursements of intercompany payables outstanding at closing. The deal is set to be completed within the first quarter of 2019.

Zhejiang Hailiang is a leading player in the Chinese copper tube and brass rod markets.  Its Chinese copper tube capacity exceeds 600ktpy, and it also owns copper tube plants in Vietnam and Thailand, the latter of which is being expanded at present. It is also rumoured to be considering the building of a new greenfield copper tube plant in Texas to serve the North American market. Zhejiang Hailiang is listed on the Shenzhen Stock Exchange. Aside from access to the European market, one of the stated aims of the acquisition is to gain access to KME’s low-lead and lead-free copper alloys in brass rod markets. This is the first acquisition of a major European fabricator by a Chinese company and the other regional market players are likely to be wary of its outcome and implications. Chinese company Boashida had bought the small specialist copper and brass fabricators Swissmetal several years ago.

The future for the remaining operations of KME is now somewhat clearer. Following KME’s acquisition of Germany’s MKM last year (with a product range of copper wire rod, flat rolled products, copper tubes and copper extrusions) the focus of KME will now be on copper and copper alloy rolled products, copper wire rod and special products. The transaction with Zhejiang Hailiang reduces the portfolio and industrial complexity of KME as well as decreasing the products and plants. It was well known in the industry that KME’s brass rod and copper tube assets had been up for sale for over a year. Although several entities explored the possibility of buying the businesses it appears that Zhejiang Hailiang was the only company to come to table with an acceptable offer to KME. Following the acquisition, Zhejiang Hailiang will become one of the top 3 copper and semis manufacturers in the world.

Roskill’s new report Copper Demand to 2035: Global Industry, Markets & Outlook is due to be published in Q1 2019. Click here to download the brochure and sample pages, or to access further information.

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