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Sinomach Said in Advanced Talks to Buy European Tool Maker MAG

China National Machinery Industry Corp., an agricultural and engineering equipment manufacturer, is in advanced talks to buy MAG’s European machine-tool making unit, people familiar with the matter said.

The Chinese company, known as Sinomach, may reach an agreement by the end of the year, said two of the people, who asked not to be identified as the discussions are private. Negotiations are ongoing so the price may change and the deal could still fall apart, the people said.

MAG’s U.S. unit is also being sold and Sinomach could purchase that business as well, though U.S. division may also be bought by another party, two of the people said. The European and American units are owned separately since the European business was handed over to a trustee in November 2011. The European process is more advanced than the American one, two of the people said. Together, the two businesses may be valued at about 500 million euros ($653 million), two of the people said.

Sinomach is stepping up acquisitions overseas as it seeks to increase production of high-end industrial equipment and plant machinery. A purchase of MAG’s European unit, which traces its roots to a company founded in 1798 in Remscheid, Germany, would follow rising Chinese interest in German manufacturers including Sany Heavy Industry Co.’s acquisition of concrete-pump maker Putzmeister Holding GmbH in January and Weichai Power Co.’s stake purchase in forklift maker Kion Group GmbH in August.

A spokeswoman for Sinomach declined to comment.

Technological Access

The purchase of MAG would give the Chinese access to advanced technology in machine tooling and may enable Sinomach to reduce reliance on importing machinery by setting up its own production in China, one of the people said.

MAG has about 3,500 employees at 35 facilities throughout Europe, the U.S. and Asia and generated 2011 sales of $1.3 billion, according to its website. The company provides machine tools and systems for industries including automotive, aerospace, oil and gas and wind and solar. The firm has expanded globally by combining German and U.S. machine tool makers. It lists Goeppingen, Germany, as the headquarters of MAG Europe and Erlanger, Kentucky, for MAG Americas.

YTO Group Corp., a agricultural machinery unit of Sinomach, bought McCormick France SAS, a French manufacturer of tractors, for 8 million euros. Sinomach Heavy Industry Corp. bought more than 50 percent of a crane-making venture with Terex Corp in March.

Sinomach was established in January 1997 and is controlled by the State-Owned Assets Supervision and Administration Commission. The group has 50 subsidiaries, including 7 listed companies, and had 191 billion yuan of operating revenue reaching in 2011, according to its website.

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