* Daikin will not raise capital to fund the deal
* Daikin plans to issue about Y50 bln in bonds -exec
* Daikin shares fall 3.5 pct vs. 0.4 pct rise in Nikkei
By Yoshiyuki Osada
OSAKA, Aug 29 Daikin Industries Ltd will buy
Goodman Global Inc for $3.8 billion, gaining greater
access to the North American market and making the Japanese
company the world's largest maker of heating, ventilation and
air-conditioning (HVAC) systems.
Daikin has long been interested in its Houston,
Texas-based rival, but put off takeover talks following Japan's
devastating earthquake and tsunami last year and then later due
to uncertainty over the global economy.
The deal will strengthen Daikin's business in duct-type
air-conditioners, where ducts are used to ventilate buildings,
the prevalent technology used in the United States, analysts
"They've tried for so long to break into the U.S.
residential air-conditioner market with their ductless
technology, but it's just not happening, so acquiring into that
market is the only way to go," said Edward Bourlet, a machinery
analyst at CLSA Asia Pacific Markets in Tokyo.
Daikin gets less than 10 percent of sales in its major
air-conditioning segment from the Americas, a market that
includes Johnson Controls' York, Lennox International
, and Ingersoll Rand Plc's Trane.
The Japanese firm, helped by a strong yen, will pay 296
billion yen ($3.77 billion) for Goodman in an acquisition that
will allow it to overtake top-ranked Carrier brand maker United
Technologies Corp as the world's top HVAC maker.
Reports from Reuters and other media of the purchase from
private equity firm Hellman & Friedman before its announcement
caused Daikin shares to fall on Wednesday on worries that the
price was too high.
Daikin shares tumbled nearly 9 percent in early trade,
before trimming losses to finish 3.5 percent lower, its biggest
daily drop in three weeks. The benchmark Nikkei 225 average
settled 0.4 percent higher.
"The stock is being sold on the view that price of 300
billion yen is a little steep when you look at sales and other
data from Goodman," said Tomoichiro Kubota, senior market
analyst at Matsui Securities in Tokyo.
"(However) competing against Chinese rivals by boosting
scale and location is a move in the right direction (for Daikin)
and individual investors seem to be buying shares at the low
prices," he added, after the stock trimmed losses.
Daikin will not turn to equity markets to fund the deal but
use loans, its cash reserves and tap a bond issue of about 50
billion yen, a company official said earlier on Wednesday.
Daikin aims to complete the deal, which is Japan's
third-biggest so far this year, in the fourth quarter of 2012.
The Japanese firm expects 24 billion yen in strategic and
efficiency benefits from the purchase in three years.
Backed by the strong yen, outbound M&As by Japanese firms
had a total value of more than $46 billion in the year to date,
slightly higher than the same period in 2011, when outbound
deals hit a record for the calendar year, according to Thomson
In terms of Japan Inc.'s overall mergers and acquisitions
for the year to date, 40 percent have been between domestic
firms, while a third was with U.S. companies and 17 percent with
Asian firms outside Japan.
San Francisco-based Hellman & Friedman bought Goodman Global
in October 2007 for $1.8 billion in cash, including $1.1 billion
of its own capital. The transaction also included assumed debt
and other financing for a total of $2.65 billion.
The deal comes more than two years after Goodman Global
filed for an initial public offering in May of 2010. The company
withdrew its IPO registration later that year, and a source at
that time said it had explored a possible sale to Daikin and
other potential buyers.
The deal by Hellman & Friedman is the latest in a string of
sales for the private equity firm this year which included
offloading its holdings in photo agency Getty Images Inc and
restructuring advisory firm AlixPartners.