CNH says it terminated Fermec sale contract, buyer appeals to EU

By Neil Versel

BRUSSELS, Aug. 2 (SNS) — CNH Global N.V. (CNH), a major worldwide producer and seller of construction and farm machinery, faces a complaint alleging that it did not follow required procedures in divesting itself of its Fermec Holdings Ltd. construction machinery-making unit after it was unable to come to terms with a potential buyer, sources disclosed today to Stark’s News Service Interactive.

Sources told SNS Interactive that EarthForce Holdings N.V., a privately held producer and seller of construction equipment in Europe and North America, yesterday filed an administrative complaint here with the Commission of the European Union, an antitrust regulatory authority. The complaint alleged CNH “has not followed the mandate of the EU,” by withholding financial information from EarthForce and attempting to renegotiate parts of the sale after reaching a preliminary agreement, according to sources.

The sources told SNS Interactive that data recently presented to EarthForce by CNH showed a “financial deterioration” of Fermec during the first half of 2000. The sources said that Fermec has taken on more than $20.0 million in additional debt since the end of 1999 and holds a weaker equity position than it previously did.

The sources further disclosed that “both sides failed to deliver” unspecified information when CNH and EarthForce were in the final stages of negotiation last month.

CNH today issued a statement from its headquarters in Racine, Wis., saying that the EU Commission gave the company a two-month extension to the previous July 28 deadline to sell Fermec after the firm “terminated” the deal with EarthForce because the suitor “did not meet the terms of the agreement.”

An EarthForce official told SNS Interactive today that CNH’s claim that it terminated the preliminary sale agreement is “in contention.”

CNH further disclosed in the statement that it has re-opened talks with other companies that previously expressed interest in Fermec and will entertain inquiries from other parties. “All Fermec operations and commercial activities will continue under normal business conditions during this time,” CNH said.

A CNH spokesman contacted by SNS Interactive today was not aware that EarthForce had petitioned the EU and would not comment on the latest development.

As reported, CNH agreed last May 30 to sell Fermec’s manufacturing plant in

Manchester, England, Fermec’s lines of construction-type wheel loaders and industrial

wheel tractors and an existing dealer network in Europe, the Americas and Australia to

EarthForce. EU regulators approved the sale last month.

The deal called for CNH to retain the rights to Fermec-branded mini-excavators, which it holds under license from Kobelco Construction Machinery Co. Ltd, a subsidiary of Japanese industrial conglomerate Kobe Steel Ltd. (KBTSY). CNH said that EarthForce will supply it with excavators for sale under the Case nameplate.

CNH also disclosed that it negotiated a non-exclusive supply contract for EarthForce to manufacture Case-branded skid-steer loader backhoes at the Fermec plant. As part of the arrangement, the American company no longer will supply Fermec with skid steers built at a CNH assembly plant in Wichita, Kan.

As reported, EarthForce beat out major machinery-makers AB Volvo (VOLVY) of Sweden and Terex Corp. (TEX) of the United States, who also pursued the CNH subsidiary. Volvo has been clear about its desire to expand its global construction machinery business via acquisitions.

EarthForce, based in Amsterdam, operates a manufacturing plant through its Superstav s.r.o. subsidiary in Dobris, Czech Republic, as well as sales and marketing units in Britain and the United States. Its ownership is Dutch and American.

CNH was forced to sell the Fermec unit under terms of an October 1999 consent agreement with the EU Commission. The commission mandated the sale of several CNH holdings in Europe as a condition for approval of Dutch machinery-maker New Holland N.V.’s $4.60 billion purchase of U.S. rival Case Corp. that created CNH last year.

The former Case Corp. acquired Fermec in October 1998.

NV