The decision is in line with IHI Group Management Policies 2016, which adopted a new portfolio management approach to reinforce IHI’s earnings base.

“This share transfer was an outcome of construction machinery business deliberations as part of efforts to accelerate business concentration and selection,” IHI said.

IHI Construction Machinery was established in 1952 as Ishikawajima Koehring Co., a joint venture with Koehring of the United States. Over the years, the company has manufactured and sold mini excavators, cranes, crawler carriers, and other construction machinery, offering top-notch products and services in Japan and abroad.

“In light of growing global populations and higher urbanization rates, the construction machinery sector offers solid long-term potential. In recent years, however, the sector has experienced an increasingly adverse operating climate owing to slower growth in emerging nations and more uncertainty in the global

economy. Construction machinery companies have endeavored to accommodate these dramatic changes and reinforce their business underpinnings by forming alliances or restructuring,” the company added.

Established in 1895, Kato Works is a leading construction machinery company. It is pushing forward with Medium-Term Management Plan 2016-2018, targeting net sales exceeding ¥100bn. It is deploying measures to reach the global market, develop highly competitive products and expand its lineup.

It was against this backdrop that IHI explored the optimal business structure to deploy IHI Construction Machinery’s resources, centered on its strengths in mini excavators and large crawler cranes. Management concluded that integrating that subsidiary’s operations with those of Kato Works as a specialized construction machinery player would reinforce competitiveness.

Kato Works said: “We expect that the product line-up will be enhanced in the synergy effects between our products and IK products such as mini-excavators, crawler cranes and other crawler equipment.

“All current facilities and network including overseas will be kept without major changes for the time being. The two companies will be assimilated over time, and both companies shall enter to new stages while we are confirming synergy effects practically in the market.”

The name IK will be changed after the transfer has been completed.

The transfer is subject to regulatory approval, with a scheduled transfer date of November 25, 2016.