BACKHOES-TO-MINIS manufacturer Fermec is to be carved up to allow parent company Case to be bought out by New Holland.
The decision to dispose of the Manchester factory and backhoe line has been taken to meet European Commission anti-competition rules. Case only bought Fermec three years ago.
The sacrifice of Fermec has surprised many in the industry, especially as the deal does not include either mini excavators or the Case-branded products built in Manchester.
Case said it retains the right to all the other brands and so will look to place the remaining production elsewhere. However, the only available UK capacity would appear to be at New Holland's plant in Basildon, Essex.
The future of Fermec's workforce has also yet to be resolved following its brands being split
The EC has approved New Holland's£2.6 billion takeover of Case on the condition that New Holland/Case reduced a number of brands. It has been agreed the new company will cut its backhoe brands to avoid a virtual duopoly with JCB in the European market.
The deal has still to be passed by US anti-monopoly authorities.
An EC statement said: 'The concentration as originally notified would have caused serious competition concerns by threatening to create a collective dominant position by the merged entity and JCB on the European Economic Area market for backhoe loaders.
'The merged entity and JCB would together hold a substantial part of the market, have similar and stable market shares, could significantly influence retail prices and would not easily be challenged by competitors.'
The terms of the EC agreement dictate that brands should be sold complete with workforces, assets and contracts to preserve competition and protect workers to a large degree.
The sale is likely to lead to an approach from Volvo, which is desperate for a backhoe line and missed out on purchasing Fermec in 1996.
The news comes in the same week that Case and New Holland posted their third-quarter results. Both companies were hit by continued poor agricultural sales.
New Holland posted profits of £24.4 million in the three months to September 30, down 31 per cent on last year.
Turnover was £818 million, up 2.5 per cent on the corresponding period last year. Construction equipment turnover rose 31 per cent,reflecting the acquisition of German manufacturer O&K.
Meanwhile, Case reported a net loss of£1.9 million in the quarter (compared with a profit of £39 million last year) and turnover down 13 per cent to £625 million.
However, it said European construction equipment sales had risen and that the sales outlook continued to improve.