Numerous Finnish companies have said they aim to create a large cluster of engineering firms put together but the actual development has been slow. Mainly Capman (OMXH: CPMBV)-owned Komas has been among the most active in seeking industry consolidation. Now as it joins forces with Ruukki Engineering, a part of Rautaruukki (OMX: RTRKS), to form a new company called Fortaco, there will indeed be a player the size to be reckoned with. Komas contributes units that have annual sales of over 100 million and Ruukki’s ship in units with revenue above 150 million to be combined into a 2600 employee company with manufacturing units in Finland, Estonia, Poland, Slovakia and Hungary.
The companies view the assets put into the new company as very synergistic with little or no overlapping operations. Ruukki will receive 25 million Euros in cash and equity-linked securities worth around 81 million in the company corresponding to the asset values that the firm is providing on top of a 19% ownership portion in the new company. CapMan funds will own 66.5% and management + Komas Group's private owners will have the remaining 14.5%. Completion is subject to required approvals and is expected to close by December.
One of the usual desires nowadays is to move up the value chain. Fortaco’s offering will include final assembly of machines, operator cabins and welded and or machined components. With a more diverse customer base, the effect of business cycles should be somewhat mitigated as well. Around half of the sales come from Finnish units that employ a third of the personnel. The units in the new company from Komas side are: Sastamala, Kurikka, Parkano and Härmä in Finland, Janów Lubelski (Poland) and Narva (Estonia). Ruukki Engineering moves Kurikka, Sepänkylä and Kalajoki component units as well as Jászberény (Hungary), Wroclaw (Poland) and Holíč (Slovakia) units. Komas Jyväskylä does not move to Fortaco. Both stocks responded positively with an almost 5% advance on the news.
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