Midea Group Co. has made a cash offer for KUKA Robotics AG in what would be one of the largest unsolicited takeovers of a German company by a Chinese one to date. Home appliance maker Midea already uses KUKA’s industrial robotics in its factories and logistics centers.
KUKA is one of the “big four” manufacturers of industrial robots, along with ABB, which is based in Switzerland, and FANUC and Yaskawa, which are based in Japan. China has been looking to expand its capabilities, not only as “factory to the world,” but also as a robot producer.
To that end, Chinese companies have made 281 foreign deals worth $108.5 billion so far this year, compared with 611 deals worth $106 billion last year, said CNN. Chinese companies have already spent $3.5 billion just on German companies this year, according to The Wall Street Journal. An aging population and rising wages are incentives for them to pursue automation.
The industrial robotics market will experience a compound annual growth rate of 11.92 percent to reach $79.58 billion by 2022, predicts Research and Markets, which identified KUKA as a market leader.
Midea offers reassurances amid buying binge
Midea has offered cash to increase its stake in KUKA AG from an indirect 13.5 percent to at 30 percent, valuing the company at €4.6 billion ($5.2 billion). It’s offering €115 ($129) per share. KUKA said it will consider the offer, and German and Chinese regulatory authorities are expected to approve the deal.
In addition, Midea said it plans to leave KUKA’s management alone, possibly to allay fears among KUKA’s existing employees and shareholders, even as it plans to reduce headcount in its Chinese factories.
“We don’t plan to wholly acquire KUKA,” said Paul Fang, chairman of Midea. “What we want is to be a meaningful shareholder.”
“No matter how big a stake Midea holds, KUKA will be an independent company, and we don’t plan to interfere in their independence,” he added. KUKA has about 12,300 employees and made €3 billion ($3.39 billion) in revenue last year. Midea’s sales totaled 138.4 billion yuan ($21.2 billion) in 2015.
However, “as a traditional producer of durable consumer goods, Midea’s domestic market is almost saturated,” said Huang Fusheng, an analyst at China Securities. As a result, it wants to cut costs and increase productivity through automation.
“One of the leading rationales for the deal is rising labor costs,” said Andy Gu, vice president for Midea’s international business. “This means efficiency becomes more important for growing our business and for the Chinese economy as a whole.”
The deal would help Midea modernize its factories and expand further into robotics and smart-home devices. It would also give KUKA wider access to the growing Chinese market for industrial automation.
“The Midea-Kuka deal will be a win-win for both sides,” said Wang Cairong, executive editor at the China Artificial Intelligence Robot Industry Alliance. “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.”
Midea “has been on an acquisition spree this year,” noted the BBC. Midea recently bought Japan-based Toshiba Corp.’s consumer electronics business for $473 million. Midea attempted to acquire General Electric Co.’s home appliance unit, which fellow Chinese firm Qingdao Haier Co. ultimately bought for $5.4 billion.
KUKA partners up on multiple projects
KUKA’s industrial automation customers include Airbus, Boeing Co., Volkswagen AG, and Fiat Chrysler NV. At Hannover Messe 2016, the company signed a memorandum of understanding with ITW Welding, part of Illinois Tool Works Inc., to offer arc welding robots internationally.
KUKA Robotics and ITW also plan to develop a common interface for robotic welding. In addition, the company is considered a leader in the industrial Internet, in which smart factories are connected. It recently partnered with India-based Infosys Ltd. to develop Industry 4.0 software and services.
KUKA’s Connyun subsidiary will work on the cloud-based platform, which is intended to enable customers to gather and analyze data to improve their processes.
In other robotics, KUKA and Siemens AG are working with universities in the Netherlands, Austria, and Italy on the MRI and Ultrasound Robotic Assisted Biopsy (MURAB) project. With $4.6 million in funding from the EU’s Horizon 2020 fund, they are developing a new robotic arm that would make medical imaging and tissue sampling easier and cheaper.
Siemens and KUKA previously worked together on machine tool tasks. KUKA and Midea could also collaborate on projects beyond industrial automation, such as consumer or social robots.