Helsham

The road ahead for the world’s highways is looking costly—China alone has billions of dollars in the works through the next decade’s end. So, instead of trudging down a long path of designing its own paving machines, Volvo Construction Equipment is taking the express lane.

Volvo has decided to buy its way into the $4-billion-a-year roadbuilding equipment business with a $1.3-billion cash offer for Ingersoll-Rand’s road group. Volvo CE President Tony Helsham says it “fits exceptionally well.”

The two companies expect to close the sale in the second quarter. It would make Volvo one of the top producers of heavy equipment in the world, with an estimated $6.4 billion in annual revenue. It also would give the firm a hefty, 37% share of the North American paving equipment market.

Ingersoll-Rand Volvo paves way for hotter sales.

Announced on Feb. 27 at AB Volvo in Stockholm, Sweden, the news had observers concerned about the price but still nodding their heads. “It quickly propels [Volvo] into a full- line supplier,” says Frank Manfredi, an equipment analyst in Mundelein, Ill. Along with the iron, Volvo gets 20 more company stores in the U.S., though it has not yet said how it will rationalize these dealers. “Distribution is the key,” Manfredi says.

“This is a major deal,” says Charles R. Yengst, a machinery analyst in Wilton, Conn. “We’ve all watched [Volvo] for years.…I was rather surprised to see them get off the dime and do something.”

Clients, too, have long asked why Volvo is not in paving. If the deal works out, Volvo would satisfy the demand—and might boost its earthmoving sales at the same time, Yengst notes. “They’ve finally bought something where they get to be top dog,” he says.