FRANKFURT (Reuters) - Chinese home appliance maker Midea Group (000333.SZ) made an offer on Wednesday to buy German factory robot manufacturer Kuka AG (KU2G.DE), the latest bid by a Chinese investor to gain control of cutting-edge German industrial technology.
The 115 euro per share offer values Kuka at around 4.5 billion euros ($5.07 billion) and represents a premium of 36 percent to Kuka’s share price of 84.41 euros at close on Tuesday. Shares in Kuka rose by over 30 percent on the news.
Kuka is one of the world’s largest producers of industrial robots and a poster child of Germany’s drive to upgrade its manufacturing sector to master the industrial internet.
It is the latest in a series of German industrial groups to be targeted by Chinese buyers as the world’s second-largest economy tries to make the transition from a low-cost factory location into a high-tech industrial hub.
Midea said it wanted to keep Kuka’s management intact and not delist the German company. Following a pattern set by Chinese suitors seeking to avoid disruption to better understand and adopt Western technology, it said it would not implement a so-called profit transfer and domination agreement.
“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,” Midea Chairman and Chief Executive Paul Fang said in a statement.
Midea said it aimed to expand Kuka’s know-how in robotics for general industry and logistics applications and open doors for better access to Chinese markets.
“One of the leading rationales for the deal is rising labor costs. This means efficiency becomes more important for growing our business and for the Chinese economy as a whole,” Andy Gu, Vice President for Midea’s international business, told Reuters.
“We want to keep Kuka’s separate identity as a German company,” he said. “Where we can help Kuka is mostly in China. Kuka management has plans to grow in China. Given our meaningful footprint in China we can help them accelerate growth in terms of our customer base and supply chain.”
Other Chinese investment in Germany this year includes an agreement in January by a consortium led by ChemChina to buy industrial machinery manufacturer KraussMaffei Group for about $1 billion.
In 2012, China’s Sany Heavy Industry (600031.SS) bought German concrete pump maker Putzmeister for $698 million, while Weichai Power (000338.SZ) took a 25 percent stake forklift truck maker Kion (KGX.DE) in 2012.
Germany depends on manufacturing for a larger share of the economy than any of its western European neighbors, with tens of thousands of family-owned businesses building the bedrock of its export-driven success.
The government wants to foster adoption of the fast-evolving industrial Internet, in which smart factory systems are becoming increasingly connected. Kuka has branded itself as one of the pioneers.
Kuka shares jumped as much as 35.5 percent to a record high on Wednesday and traded 32 percent higher at 0743 GMT on the Frankfurt Stock Exchange.
Midea said it had a 13.5 percent stake in Kuka and was seeking to become the largest shareholder by raising its stake beyond 30 percent.
Augsburg Kuka has three large shareholders including Friedhelm Loh, a German entrepreneur who owns 10 percent, and Voith Group which holds 25.1 percent.
Kuka said it had been informed by Midea that Midea would invite the major German shareholders to stay invested and that it wants to preserve Kuka’s sites and staff.
Kuka would carefully assess the full takeover offer once it is available, it added.
An ally of chancellor Angela Merkel said Berlin would not intervene as German companies were also buying stakes in Chinese and other foreign companies.
“We live in a free market economy and expose ourselves to global competition,” said Michael Fuchs, deputy leader of Merkel’s CDU/CSU parliamentary group in Germany’s lower house.
In terms of direct investment in property, plants and equipment, Germany’s private sector has spent almost 60 billion euros in China, dwarfing the 2 billion euros that Chinese groups have invested in Germany, according to the Association of German Chambers of Commerce and Industry.
Jost Wuebbecke of Berlin-based China-focused think tank Merics, which is backed by the Schmidt family behind retailer Metro MEOG.DE, said Chinese foreign direct investment in Germany was welcome in principle but Kuka was an exception because of its role in the industrial Internet.
“From a German point of view it’s not necessarily an advantage to share the technology because of Germany’s very considerable lead in this area,” Wuebbecke said.
Under German takeover rules, any shareholder gaining control of more than 30 percent in a listed company must make an offer to all shareholders. Midea Group raised its stake in Kuka to 10.2 percent in February, saying at the time that it wanted to further increase its shareholding.
Additional reporting by Tina Bellon and Alexander Huebner in Frankfurt; Andreas Rinke, Rene Wagner and Madeline Chambers in Berlin, Editing by Timothy Heritage