Deal will help appliance giant develop smart home devices, improve efficiency
Home appliance maker Midea Group Co on Wednesday announced an offer to increase its stake in leading German industrial robot producer KUKA AG, a move intended to increase the Chinese company's expertise in robotics for general industrial and services applications.
Midea already indirectly owns 13.5 percent of KUKA. Under the new offer, Midea aims to raise its stake above 30 percent, the company said in a statement on its website.
Midea is offering to pay 115 euros ($129.52) per KUKA share, Midea said, which represents a premium of about 36 percent over the closing price on Tuesday. The price values the German robot maker at more than $5 billion.
The deal will be made via affiliate MECCA International (BVI) Ltd, and Midea is "fully committed to KUKA's independence and status as a listed entity in Germany," according to the statement.
The offer is subject to conditions, which include a minimum acceptance threshold of 30 percent of the issued shares of KUKA, including those already owned by Midea, the company said.
Analysts said that cooperation between the two will be a win-win outcome.
KUKA aims to expand sales to 1 billion euros in China by 2020 from the current 425 million euros, and Midea can help KUKA do that with its "extensive network of distributors and suppliers" in China, Midea said.
China's demand for robots is huge as the country further upgrades its manufacturing sector, which represents a great opportunity for KUKA, analysts said.
For Midea, the investment in KUKA also offers great benefits.
"Midea, like other home appliance makers, is exploring new growth engines as profits in the sector decline, and robots have become an important part of Midea's plan in this regard," Liu Buchen, a Guangzhou-based independent industry analyst, told the Global Times Wednesday.
Midea has already ventured into robotics. It formed two joint ventures in August 2015 with Japanese robot maker Yaskawa Electric Corp to build service and industrial robots.
The investment in KUKA, which will give Midea access to know-how involving industrial robots, could help Midea improve its production efficiency. The sector is labor-intensive, and many home appliance makers are adopting digitalized production technologies as labor costs in China rise, analysts said.
Founded in 1968, Midea is a leading maker of air conditioners, refrigerators and washing machines. But it has demonstrated an interest in developing smart home devices, and "the cooperation with KUKA would also help Midea in this regard," Wang Danqing, a partner at Beijing-based consultancy ACG, told the Global Times Wednesday.
Midea has stepped up its overseas expansion recently. In March, it said it would acquire a controlling stake in Japanese conglomerate Toshiba Group's consumer-electronics business for about $473 million. The move came two months after its domestic rival Haier Group said it would acquire General Electric's appliance unit.
Midea's offer to KUKA also expands the overseas investment spree by companies based in the Chinese mainland. There were 115 outbound merger and acquisition deals in the first quarter of 2016, worth $82.6 billion, more than all previous annual figures, according to a report from PwC in April.
"It's time for Chinese home appliance makers to expand their international influence," Liu noted, adding that before long, China may have world-leading home appliance producers like Siemens and Sharp Corp.
