Hoe Leong Corporation, the supplier of heavy equipment parts, says wholly-owned subsidiary, Kunshan Kanto Buhin Manufacturing Co., has signed an agreement with Valuepart Europe SPA (VE SPA) to set up a JV company, Kunshan Xinyilong Machinery Manufacturing Co. to expand its heavy equipment parts business.

The registered capital of Kunshan Xinyilong will be US$6 million ($8.4 million). VE SPA will invest US$3 million in cash and Kunshan Kanto will invest US$3 million – comprising assets valued at US$1 million and the RMB cash equivalent of US$2 million.

VE SPA is one of the major distributors of undercarriage components in the world and possesses the know-how and technology required for providing undercarriage components. In addition to its presence in Europe, the Valuepart Group also has a strong distribution network in the US and Canada. VE SPA intends to manufacture undercarriage parts for heavy equipment, relying on its production know-how to ensure the quality and reliability of undercarriage parts sold to its customers worldwide, in particular to earth-moving machine manufacturers on an OEM basis. VE SPA also intends to source for other undercarriage parts at more competitive prices for distribution worldwide.

Kunshan Xinyilong will be principally engaged in the business of production, distribution, sales of undercarriage parts for earth-moving machines and upon its establishment, both VE SPA and Kunshan Kanto will apply the business licence with the State Administration for Industry and Commerce of China.

The US$2 million cash portion of the investment in Kunshan Xinyilong will be funded by internally generated funds and is not expected to have any material impact on the consolidated net intangible assets and earnings per share of the company for the financial year ending 31 December 2010.