Split up of Atlas Copco will not impact Gulf business

Atlas Copco’s decision to split into two separate entities, and to sell its road construction equipment division, is not expected to affect its business in the GCC

Atlas Copco is splitting its mining and construction interests off into a new company with the working title of NewCo.
Atlas Copco is splitting its mining and construction interests off into a new company with the working title of NewCo.

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Atlas Copco’s activities should not be affected by the announcement of both plans to split into two listed companies, one for industry and one for mining and construction, and to sell its road construction equipment division, according to the spokesperson for the company in the region.

A new company with the working title of NewCo will be formed to focus on Atlas Copco’s civil engineering business area, including the existing mining and rock excavation technique and construction tools divisions, with revenues of $3.2bn and around 12,000 employees.

Atlas Copco will refocus the company’s larger industrial business with revenues of $8.3bn.

In terms of the impact on the Gulf, Steven McEwan, the spokesperson for Atlas Copco Middle East, told PMV: “Yes there are quite a few changes coming to Atlas Copco this year and next, however we foresee this to have no or minimal impact to our operations and customers in the region.”

With regards to the sale of Atlas Copco’s road construction equipment division, which includes the Dynapac brand of compaction, paving and milling equipment, a buyer has now been found in France’s Fayat Group.

Atlas Copco’s road construction equipment division has sales and service operations in 37 countries and employs 1,265 people, and reported revenues of roughly $327m in 2016.

The acquisition is subject to regulatory approvals, but Fayat has said that it expects the deal to be completed during the second quarter of 2017.

McEwan stated: “The decision was made to divest our road construction equipment division (Dynapac) to French industrial and construction company Fayat Group, which we believe is a good owner to carry the business over (subject to regulatory approvals).

Atlas Copco has stated that the decision to divest from road construction equipment was made because due to the fact that Atlas Copco did not see itself as having the economies of scale with the division to become number one or two in the market segment.

With regards to the split, McEwan noted: “Provided that Atlas Copco’s shareholders approves, the group will be split into two listed companies in the second quarter of 2018, both of which will remain global leaders in their respected areas.”

He added that the synergies between the business areas of Atlas Copco and the proposed NewCo are limited, with the business areas having different end-markets and different demand drivers.

“They have different demand patterns: the industrial part tends to have more stability, while the mining/civil engineering part is characterized by high volatility. The split will increase their respective abilities to add value to customers, grow the business and attract talent,” he said.

But he affirmed that things would remain very much “business as usual” for the foreseeable future.

On other news, Atlas Copco will appoint Mats Rahmström and its president and CEO on April 27, 2017, replacing Ronnie Leten, who is leaving his position, after eight years managing the company.

 

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