Australia’s Seven Group Sells China Mining Equipment Unit for $426 Million

Australia’s Seven Group Holdings Ltd. said it will sell its China-based mining equipment business to Lei Shing Hong Machinery Ltd. for A$540 million ($426 million), as it looks to recoup capital for new investments in its home market.

The sale comes as the company, WesTrac China Co. Ltd., is performing well in an industry that is prone to cycles due to changing government policies and volatility in global commodity prices. Founded in 2001, WesTrac sells equipment in Shanxi, Hebei, Liaoning, Heilongjang and Jilin provinces, as well as the Inner Mongolia autonomous region and the cities of Beijing and Tianjin.

Both WesTrac and new owner Lei Shing Hong have a close relationship with global mining and heavy equipment supplier Caterpillar Inc.

The sale will provide Seven Group with money to invest closer to home in its Australian businesses, CEO Ryan Stokes said in an announcement on Tuesday.

“We are proud to have built a market leading position in Northeast China and we are confident that under the ownership of Lei Shing Hong Machinery — a major Caterpillar dealer in China — our customers will continue to benefit from innovation and first-in-class service,” he said.

The purchase will help Lei Shing Hong consolidate its market position, CEO Lawrence Po said.

The deal comes as China’s mining industries could be poised for an uptick, following a weak period during a global supply glut. But China has also signaled it wants to consolidate its coal mining sector, closing down smaller operations in a bid to make the industry more efficient and also reduce its dependence on the heavily polluting fossil fuel.

That consolidation drive has prompted some coal industry specialists to try to move into other areas.

In May, Zhengzhou Coal Mining Machinery Group Co. Ltd. said it would pay 545 million euros ($640 million) for a major unit of leading global car parts maker Robert Bosch GmbH, in its own drive to diversify amid the ongoing coal industry consolidation. Zhengzhou Coal announced the deal just six months after saying it would buy six car parts makers for 2.2 billion yuan ($330 million).

Contact reporter Yang Ge (geyang@caixin.com)