Fluke, aberration, or sign of the times
Is KUKA’s $335M purchase of mobile robotics maker Swisslog just the beginning of a major industry consolidation that will witness many more or all of the old-line industrial robot manufacturers buying into mobility?
Consolidation was a major theme in our August webcast and research report: Robotics and the New Supply Chain: 2015-2020.
Mobile robotics’ time has come, and robot manufacturers are beginning to show keen interest. Let’s face it, mobile robots are difficult to build, yet more and more they are in demand as mega-industries like logistics, healthcare, automotive, mining, agriculture, and construction[–just to name a few!–are seeking out mobile solutions.
Not surprisingly, the major industrial robot manufacturers, like KUKA, ABB, Yaskawa, and Staubli, who pioneered stationary robots for manufacturing, but mostly passed on the far more tedious and expensive development process of mobile robotics, have little or no mobile solutions to offer up to these trillion-dollar industries. For the old liners, it must have seemed more prudent to stay the course of traditional robots with their wonderful profit margins, where proprietary software, service and parts represent 50 percent of revenue. With automotive and electronics manufacturing representing more than 50 percent of sales for industrial robots, why bother with the chancy world of mobile robotics?
Times have changed
Automatica, arguably the largest and most prestigious robot showcase in the world, opened a new venue for 2014 with some 58,000 square feet of exhibit space devoted to service and mobility. Shareholders from old-line robot manufacturers must have been shocked to note that none of their investment’s logos where on any of the equipment in the service and mobility expo space. And what walks off with best of show? Argo Medical Technologies and its ReWalk exoskeleton system. Mobility, from a startup no less.
The World Technology Evaluation Center’s International Study of Robotics Research forecasts stationary, industrial robots as a distant third place in sales by 2025, with mobile robots and service robots leaping into a commanding lead. So what’s a sit-on-the-sidelines, old-line robotics manufacturer to do? Take the tried and true way out: grow and remain relevant through acquisition. Buy into the new paradigm of mobile technology with its manipulation, perception (vision), human-robot interfaces, autonomy, design, packaging, power and safety.
KUKA and Swisslog
Admittedly, Swisslog needed the deal to happen, and the all-cash $335M buyout eased some of its recent rough times. The venerable Swiss logistics manufacturer, founded in 1898, was not doing as well as it needed to in both divisions: the Warehouse and Distribution Solutions division and the Healthcare Solutions division, so said the company’s president of its board of directors, Hans Ziegler: Half-Year Report 2014.
European and North America sales were down considerably, with Asia being the only bright spot. Swisslog was buoyed recently by a big-win contract in the banking industry in South East Asia for its automated material handling systems. Of course, not everyone is as happy about the deal as Swisslog.
Shares in KUKA fell abruptly after the industrial robot maker announced plans to make the purchase. Reasoning behind the downturn was seen as: although the buy had strategic rationale it was too pricey. KUKA’s stock fell to its lowest level in more than a month, down by 4.4 percent to $57.61 ($45.42).
As DAILYMAIL.COM reported: “Swisslog shares jumped to a more than six-year high of 1.35 Swiss francs [$1.42] representing a 22 percent premium to the target’s six-month average share price, according to Reuters.”
The acquisition, which KUKA plans to partly finance by issuing up to 1.8 million new shares, will increase the company’s presence in the general industry sector and make it less reliant on automotive customers. “We see the rationale to reduce the automotive dependency and increase scale in the automation business. However, we consider the price to be high,” DZ Bank analyst Jasko Terzic wrote. He said the price valued Swisslog at 12.2 times estimated enterprise value to core profit (EBITDA), a 70 percent premium to capital goods peers.
“Even including synergies, which KUKA put at more than $10.5M a year, the premium is 30 percent,” he said. Although KUKA’s stock took a hit in its acquisition of mobility, it was a far cheaper price to pay than having to develop mobility on its own. Who’s next?
