China’s Midea Group bids for greater ownership of robot maker KUKA; German company’s shares surge

KUKA’s stock price gains over 30 per cent.

PUBLISHED : Wednesday, 18 May, 2016, 5:30pm
UPDATED : Wednesday, 18 May, 2016, 10:34pm

Chinese home appliance manufacturer Midea Group said today it intends to take a stake in one of the world’s leading manufacturers of robotic systems — KUKA AG, headquartered in Augsburg, Germany.

Midea said in a statement it would like its ownership in KUKA to be above 30 per cent but had no plans to delist the German company, regardless of the result of the takeover offer.

The offer is being made through Midea’s affiliate MECCA International (BVI). The deal values KUKA at about 4.5 billion euros (HK$39.35 billion) and will be one of the largest unsolicited bids ever made for a foreign company by a Chinese buyer.

Midea’s efforts came after China’s ongoing frenzy in mergers and acquisitions in the technology industry. China has overtaken the United States for the first time as the world’s biggest “acquiring nation” for mergers and acquisitions in the technology industry, accounting for a 45 per cent share of the market in the first four months of this year, according to Dealogic.

We would like to have a meaningful stake in KUKA of above 30 per cent
Paul Fang, Chairman and CEO, Midea

China’s outbound technology-related mergers and acquisitions reached a new annual high of US$17.6 billion for 69 transactions in the first four months of this year, topping the US$14.9 billion recorded for the whole of last year.

It will see growing China outbound mergers and acquisitions in overseas industrial robot manufacturers, especially those in Europe with mature and core technologies, according to industry insiders.

“China has been the world’s largest market for industrial robots since 2013. But its home-grown technology still lags behind industry leaders from overseas,” said Wang Cairong, executive editor with China artificial intelligence robot industry alliance, “Domestic robot makers still rely largely on imports for key components.”

“The Midea-Kuka deal will be a win-win for both sides. It will help the Chinese manufacturing giant to upgrade its production line. Kuka will benefit from the move to the mainland market and will be able to compete for more market share within a short time,” Wang said.

“Like Midea, other Chinese manufacturers may also consider investing directly in overseas markets to secure mature industrial chains for automation and robotics projects.” he said.

In March, Wanfeng Technology Group, a privately-owned Zhejiang-based robotics maker, had acquired a 100 per cent stake in US industrial robot manufacturer Paslin for US$300 million.

KUKA’s stock price rose 31 per cent today.

The all-cash proposal of 115 euros per share compares with Tuesday’s closing price of 84.24 euros and is a premium for shareholders.

Midea’s said in February it would raise its ownership in Kuka from the current 10.2 per cent.

Engineering firm Voith Group and German billionaire Friedhelm Loh together own more than a third of KUKA.

“We would like to have a meaningful stake in KUKA of above 30 per cent and have no intention of concluding a domination agreement or delisting the company. We believe that a larger shareholding strikes the right balance between an independent KUKA while also putting both companies in a position to drive further growth through collaboration, especially in China,” Paul Fang, Chairman and CEO of Midea, said, “The investment fits perfectly into Midea’s ‘Smart²’ strategy, which aims to upgrade manufacturing competencies and develop smart home devices.”

KUKA had annual revenue of 150 million euros from the sale of robots in China in 2013 and 425 million euros in 2015. The company said it plans to grow sales to 1 billion euros in China by 2020.

“Midea sees KUKA as its partner of choice in further enhancing its automation product and service offerings, while Midea makes an ideal partner for KUKA to develop, manufacture and market KUKA’s robotics proposition. We look forward to leveraging our experience and additional financial resources to accelerate KUKA’s strategy in China and support their expansion into general industries.” said Andy Gu, Vice President of Midea

Earlier this year, Midea took control of Toshiba’s consumer electronics business for about $US473 million.

Mideas was established in 1968 as a local workshop operation. It now makes consumer appliances and heating, ventilation and air-conditioning systems. Its operations are global. Company revenue was over US$22 billion in 2015. It now has about 100,000 employees in China and throughout the world.