June 16, 2016 / 5:50 AM / 3 years ago

Offering reassurances, China's Midea launches bid for Germany's Kuka

FRANKFURT (Reuters) - China’s Midea said it would allow German industrial robot maker Kuka to operate independently and help it expand in China as it formally launched a 4.5 billion-euro ($5.1 billion) offer on Thursday.

The logo of German industrial robot maker Kuka is pictured on a Kuka robot arm during the Hannover Fair in Hanover, Germany, April 25, 2016. REUTERS/Wolfgang Rattay

Kuka is the biggest German industrial technology company to be targeted by a Chinese buyer in a wave of deals over recent months and its announcement a month ago of its planned bid caused a furor among German politicians.

Speaking during a visit to Beijing this week, Chancellor Angela Merkel signaled that she would not try to prevent a takeover but also left the door open to German firms making a counter-offer.

However, no potential German or European rival bidder has emerged at this stage.

Home appliance maker Midea reiterated its aim to acquire more than 30 percent of Kuka, which would oblige it to bid for the rest of the company under German takeover law. Its offer represents a 36 percent premium to Kuka’s share price before the approach was first announced.

The Chinese company said it could help Kuka to broaden its product offering in China, the world’s largest market for industrial robots, and could support Kuka’s local supply chain and distribution.

“Midea fully supports the operational independence of Kuka’s business and regards the continued leadership of the current management team as critical to Kuka’s continued success,” the Chinese company said.

It committed to preserve Kuka’s sites, employment levels, brands and intellectual property.

Midea said it had secured financing from the Industrial and Commercial Bank of China.

Kuka’s Chief Executive Till Reuter said he would now begin negotiations with Midea and would make a detailed statement about the offer within two weeks.

Reuter had told shareholders at the company’s annual meeting last month that Midea’s offer supported Kuka’s strategy.

NO RIVAL IN SIGHT

Kuka shares rose 2.4 percent to 108.60 euros by 0905 GMT and were the top gainers in the German mid-cap index, which was down 0.6 percent.

Midea, which already owns 13.5 percent of Kuka, confirmed it was offering 115.00 euros per share and said its offer would run from June 16 to July 15. It said it welcomed a diversified shareholder base with a high free float.

Barclays capital goods analysts, who rate Kuka “equal weight”, wrote in a note: “We struggle to see a Western company making a counteroffer at this level.”

The chief executive of industrial group Siemens, the most natural German partner for Kuka, said at the weekend Siemens had no interest in becoming a white knight.

Products of Midea are seen at a shop in Beijing, China, May 18, 2016. REUTERS/Kim Kyung-Hoon

Switzerland’s ABB, which has a large robotics business of its own, has declined to comment on reports that it would in principle be interested if the price were lower.

Privately held German engineering group Voith, which owns 25 percent of Kuka, said it would examine the offer carefully and in detail.

German billionaire businessman Friedhelm Loh, who owns 10 percent, was not immediately reachable for comment.

Additional reporting by Jonathan Gould, Noah Barkin, Alexander Huebner, Ilona Wissenbach and Irene Preisinger; Editing by Keith Weir

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