Midea makes ‘smart’ move with KUKA
White goods maker takes bigger stake in German tech firm
A larger shareholding in KUKA AG, a leading global supplier of intelligent automation solutions, will help facilitate the “smart” strategy of Midea Group, one of China’s leading industrial groups in consumer appliances, heating, ventilation and air-conditioning systems, according to a top executive of the Chinese company.
Midea, based in Guangdong province, an economic powerhouse in southern China, announced on Wednesday it had prepared to expand its shareholding in KUKA in a deal that values the German company at 4.6 billion euros ($5.2 billion).
Currently, Midea indirectly owns 13.5 percent of KUKA’s share. The voluntary takeover offer will be conducted by Midea’s affiliate MECCA International Limited, at 115 euros in cash per share.
“As a customer and investor, we have been impressed by KUKA’s management and employees and have had constructive dialogue since building our initial stake in the company,” said Paul Fang, chairman and chief executive officer of Midea, after the announcement.
According to Fang, theChinese home appliances maker would like to have a meaningful stake in KUKA above 30 percent, making Midea the biggest shareholder, ahead of Germany’s Voith, a maker of industrial equipment.
“We have no intention of concluding a domination agreement or delisting the German company,” said Fang.
In line with the applicable regulatory framework, the increase of the shareholding requires an offer for all issued shares in KUKA AG, according to the Midea.
Trading of Midea’s shares was suspended in the Shenzhen Stock Exchange on Wednesday, while KUKA shares jumped 33 percent to 112.60 euros in Frankfurt at around 9 am, according to Bloomberg.
“We are committed to investing in KUKA’s employees, brand, intellectual property and facilities to further support the company’s development, especially in the Chinese market,” said Fang.
The intended offer is in line with Midea’s “smart” strategy, which was launched in 2015 and aimed to upgrade the largest Chinese home appliances maker’s manufacturing competencies and develop more smart home devices, according to Fang.
“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,” said Fang.
One of KUKA’s key strategic focus areas is the broader robotics market in China, an area in whichMidea also sees substantial growth opportunities driven by rising labor costs and an aging population, according to Fang.
KUKA has already expanded its Asian presence in recent years, with a factory being established in Shanghai in 2013 and already having helped Midea to automate its factories.
By 2020, KUKA plans to grow sales to 1 billion euros in China, according to the German company sources.
Lin Jiang, a professor at the Guangzhou-based Sun Yat-sen University, said Midea’s increased shareholdings in KUKA would help bring more automation and smart solutions for traditional manufacturing in the Pearl River Delta.
“It (the takeover offer) would not only benefit Midea, but also the entire manufacturing industry in the Delta, as the regions is undergoing a reshuffle in industrial reconstruction,” said Lin.
We have no intention of concluding a domination agreement or delisting the German company.”