Why did Kobelco Construction Machinery acquire the construction machinery business of CNH Industrial?

Kobelco Construction Machinery Co., Ltd., a core company of the Kobe Steel Group, has reached an agreement with the multinational capital goods manufacturer CNH Industrial N.V. to acquire a majority stake in its construction machinery business (CNH CE business) and establish a joint venture. In this transaction, the enterprise value of the target business is calculated at 1 billion US dollars. The adopted scheme involves Kobelco Construction Machinery investing 700 million US dollars in cash as consideration into two newly established UK and US successor entities created by CNH Industrial spinning off its construction machinery business, thereby acquiring a 70 percent stake and making it a consolidated subsidiary. CNH Industrial will retain the remaining 30 percent stake. The closing is scheduled by the end of 2027, subject to approval by competition authorities in various countries and the fulfillment of transaction completion conditions. After the transaction is completed, a minimum three-year share transfer restriction period (lock-up) will be established, and Humayun Chishti, the current president of the CNH Construction Equipment segment, is expected to be appointed as the CEO of the new joint venture.

The seller, CNH Industrial, has been promoting its business with agricultural machinery and construction machinery as its two main pillars since spinning off Iveco Group N.V., which handled commercial vehicles, special vehicles, and powertrain businesses, in 2022. However, under CEO Gerrit Marx, the company made a strategic decision to refine itself into a pure-play agriculture company, aiming to maximize capital efficiency and eliminate the conglomerate discount. CNH Industrial's construction machinery division operates three brands globally: CASE Construction Equipment, New Holland Construction, and Eurocomach, a European specialist in compact construction machinery. It recorded sales of 3.053 billion US dollars for the fiscal year ending December 2024 and 2.956 billion US dollars for the fiscal year ending December 2025. However, in terms of profitability, it was hit by inventory adjustments and sluggish sales volumes in North America, as well as rising component and tariff costs due to changes in the trade environment. Adjusted EBIT (earnings before interest and taxes) deteriorated significantly from 169 million US dollars (5.5 percent operating margin) in 2024 to 68 million US dollars (2.3 percent) in 2025. While the company's overall industrial segment operating margin is in the high 4 percent range, the low profitability of the construction machinery segment had become a financial burden. Through this carve-out, CNH Industrial will use the 700 million US dollars in cash to reduce interest-bearing debt and strengthen its balance sheet, while concentrating growth investments on automation and precision technology in the agricultural machinery field. CNH Capital, which provides financial solutions for customers and dealers, will remain with CNH Industrial and continue to provide sales financing, leasing, and insurance to the new joint venture.