EUR 3.8 DEAL - Midea Intends to Increase Its Stake in KUKA AG through Voluntary Takeover Offer
Midea Intends to Increase Its Stake in KUKA AG through Voluntary Takeover Offer
PR Newswire
SHUNDE, China, May 18, 2016
SHUNDE, China, May 18, 2016 /PRNewswire/ --
- Offer at EUR 115 in cash per KUKA share
- Premium of 59.6 percent over KUKA's unaffected closing price on February 3, 2016, the day before publication of the increase of Midea's stake to 10.2 percent
- Mutual strategic benefits through complimentary businesses and joint development of robotics for applications in general industry and logistics as well as service robotics
- Midea fully committed to KUKA's independence and status as a listed entity in Germany, and is committed to invest in KUKA's employees, brand, intellectual property and facilities to further support the company's development
Midea (Midea Group Co Ltd, SZSE 000333), one of the world's leading industrial groups in consumer appliances and Heating, Ventilation and Air-Conditioning (HVAC) systems, announced today its intention to launch a voluntary takeover offer through its affiliate MECCA International (BVI) Limited for all shares in KUKA (KUKA AG), a leading global supplier of intelligent automation solutions, at EUR 115 per share. The decision confirms Midea's previously stated intention to increase its shareholding in KUKA. Currently, Midea indirectly owns 13.5 percent of KUKA's shares. In line with the applicable regulatory framework, the increase of the shareholding to more than 30 percent requires an offer for all issued shares in KUKA AG.
Midea is committed to maintaining KUKA's independence as a publicly listed company in Germany and has no intention of entering into a domination agreement regardless of the result of the takeover offer.
The all-cash proposal provides KUKA's shareholders with compelling and immediate value, as it represents a 59.6 percent premium over KUKA's unaffected closing price of EUR 72.05 on February 3, 2016, the day before the publication of Midea's 10.2 percent stake. The completion of the takeover offer will be subject to certain conditions. These include, in particular, achieving a minimum acceptance threshold of 30 percent of the issued shares of KUKA, including the shares already owned by Midea, necessary antitrust and other regulatory clearances and approval of the transaction by the shareholders' general meeting of Midea.
Paul Fang, Chairman and CEO of Midea, comments on the announcement: "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. KUKA is in excellent condition today and we are committed to investing in KUKA's employees, brand, intellectual property and facilities to further support the company's development. We would like to have a meaningful stake in KUKA above 30 percent 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. The investment fits perfectly into Midea's 'Smart²' strategy, which aims to upgrade our manufacturing competencies and develop smart home devices."
Mutual strategic benefit through complementary businesses and joint development of robotics for applications in general industry and logistics as well as service robotics
One of KUKA's stated key strategic focus areas is the broader robotics market in China, an area in which Midea also sees substantial growth opportunities driven by rising labour costs and an ageing Chinese population. KUKA stated that by 2020, it plans to grow sales to EUR 1 billion in China from EUR 425 million in its most recent financial year.
As a leading industrial company in consumer products, Midea has an extensive network of distributors, suppliers and other constituents and is therefore an ideal partner to significantly strengthen KUKA's positioning, address local customer needs and increase its exposure to general industries in China, which has the largest and most diverse general industries sector in the world. Based on its excellent manufacturing capabilities, Midea will seek opportunities to support KUKA to fully utilize its capabilities and network and realise efficiencies in its supply chain.
Having serviced households both inside and outside of China for decades, Midea sees substantial potential, specifically in smart home appliances. In 2015, Midea launched its "Smart²" strategy, not only to further upgrade Midea's manufacturing and logistics automation via additional investments in robotics, but also to look into developing smart home devices based on robotics technology. Midea's goal is to raise its overall sales over the coming years to over EUR 25 billion, of which smart devices and service robotics will form a significant portion.
Andy Gu, Vice President of Midea, says: "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."
Midea also aims to enhance its manufacturing efficiency through KUKA's technology throughout its industrial base and supply chain, while KUKA can capitalize on Midea's manufacturing expertise to further develop innovative solutions. Moreover, there is a strong strategic rationale in an increased collaboration between KUKA's "Swisslog" business and Midea's broad logistics operations to drive warehouse and logistics automation in the growing Chinese logistics market. Midea sees significant opportunities to combine each company's strengths -- KUKA's robotics expertise and Midea's established position in customers' homes -- and jointly strengthen the footprint in the future service robots market by seeking opportunities to develop customized product lines, such as home and service robotics products.
Midea values KUKA's independence and proposes corresponding commitments
Midea fully supports the operational independence of KUKA's business. Midea regards the continued leadership of the current management team as critical to KUKA's continued success and is fully supportive of KUKA's current strategy, employment base and brand development.
"We intend to seek representation on the Supervisory Board in a manner which appropriately reflects our shareholding and look forward to working constructively with the other KUKA Board members and shareholders to support the company's future development. We are prepared to agree to specific commitments in this regard. We expect these to include continued support for KUKA's employment levels, brands and intellectual property. Moreover, we will look to support KUKA's additional investments in Research and Development and software to maintain its competitive advantage," said Midea Chairman and CEO, Paul Fang.
Additional information
The transaction will be implemented through a voluntary takeover offer for all outstanding shares of KUKA. Midea has the financial capacity needed to implement the transaction. The financing of the transaction will be achieved by a credit facility.
Morgan Stanley is acting as exclusive financial advisor and Freshfields Bruckhaus Deringer is acting as legal advisor to Midea on the transaction.