Daikin in talks to buy Good­man Global af­ter $3.6b bid re­jected

The Pak Banker - - Company& -

TOKYO: Daikin In­dus­tries Ltd., Ja­pan's largest air-con­di­tioner maker, is in talks to buy Hous­ton-based Good­man Global Inc. from Hell­man & Fried­man LLC to ex­pand in the U.S. mar­ket, a per­son fa­mil­iar with the mat­ter said.

The U.S. buy­out fund is ne­go­ti­at­ing a re­vised pro­posal af­ter re­ject­ing an of­fer of about 300 bil­lion yen ($3.6 bil­lion) this year from Osak­abased Daikin, said the per­son, who asked not to be iden­ti­fied be­cause the talks are pri­vate. Dis­cus­sions with Good­man could still fall apart and an agree­ment may not be made un­til next year, the per­son said.

A deal may re­sult in Ja­pan's biggest for­eign buy­out since at least 2008 and help Daikin over­take United Technology Corp.'s Car­rier unit as the world's largest air­con­di­tioner maker in an in­dus­try that's grown 30 per­cent in the last five years. Hell­man & Fried­man acquired Good­man two years ago for $2.6 bil­lion.

"The amount is quite big for them," said Hide­hiko Hoshino, an an­a­lyst at UBS Se­cu­ri­ties Ja­pan Ltd. in Tokyo who has a "neu­tral" rat­ing on Daikin. "If you look at their fi­nances or bal­ance sheet, and if the amount of about $3 bil­lion to $4 bil­lion is cor­rect, it's not easy for them to do."

While the U.S. is the biggest mar­ket for air con­di­tion­ers, Daikin should aim to in­crease sales in China and de­vel­op­ing coun­tries where de­mand is in­creas­ing, Hoshino said.

Bren­dan McManus, a spokesman for Hell­man & Fried­man, de­clined to com­ment, as did Mo­to­shi Ho­somi, an Osaka-based spokesman for Daikin. A tele­phone mes­sage and e-mail left for Good­man Chief Fi­nan­cial Of­fi­cer Lawrence Black­burn af­ter reg­u­lar busi­ness hours weren't im­me­di­ately re­turned.

"We want Daikin to be num­ber one both in name and re­al­ity," Chair­man Noriyuki Inoue told re­porters in Osaka on Sept. 28. "If you want to be num­ber one in the world you've got to be a ma­jor player in the U.S."

The 75-year-old chair­man made Daikin the world's sec­ond­largest air-con­di­tioner maker af­ter he led the pur­chase of Malaysia's OYL In­dus­tries Bhd. in 2006.

Sales at the com­pany have more than dou­bled to 1.02 tril­lion yen since Inoue be­came chair­man in 1995.

A pur­chase would push Daikin's sales above those of mar­ket leader Car­rier, in an in­dus­try worth $65 bil­lion last year, ac­cord­ing to es­ti­mates at BSRIA, a U.K.-based re­search firm. Con­necti­cut-based Car­rier, through its tie-up with Toshiba Corp., held 11 per­cent of the mar­ket last year, ac­cord­ing to BSRIA.

Daikin shares, which have dropped 18 per­cent this year, fell 3.8 per­cent to 2,993 yen as of the close on the Tokyo Stock Ex­change, the biggest de­cline since Aug. 31. Ja­pan's bench­mark Topix in­dex lost 0.3 per­cent.

Good­man, which last year posted profit of $101.8 mil­lion last year, is the sec­ond-largest U.S. maker of res­i­den­tial air­con­di­tion­ing prod­ucts, ac­cord­ing to its web­site. Daikin had net in­come of 19.4 bil­lion yen in the 12 months ended March.

Founded in 1924, Daikin be­gan as an air­craft ra­di­a­tor tubes and flu­o­rine re­frig­er­ants man­u­fac­turer, en­ter­ing the air con­di­tion­ing busi­ness in 1951, ac­cord­ing to the com­pany's web­site.

The deal may be the biggest ac­qui­si­tion of a for­eign ri­val since Mit­subishi UFJ Fi­nan­cial Group Inc., Ja­pan's biggest bank, bought San Fran­cisco-based UnionBanCal Corp. for $3.61 bil­lion in Au­gust 2008, ac­cord­ing to data. -Bloomberg

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