Midea offer

In Kuka Deal, Door Opens to China

till reuter-dpa picture alliance
Kuka CEO Till Reuter appears to be happy with the investor agreement.
  • Why it matters

    Why it matters

    Kuka’s backing for Midea’s €4.5-billion takeover bid makes it more likely the Chinese company will seize control of the German robotics group.

  • Facts

    Facts

    • Chinese appliance maker Midea put in a bid of €4.6 billion, or $5 billion, for German industrial robotics manufacturer Kuka in May, which would make it the biggest takeover ever of a German firm.
    • The German government favors a bid by a European firm to prevent technology transfers overseas, sources have told Handelsblatt.
    • Midea already owns 13.5 percent of Kuka, while German billionaire Friedhelm Loh holds a 10 percent stake and privately-held German engineering firm Voith owns a 25.1 percent stake.
  • Audio

    Audio

  • Pdf

Germany has signalled a new, more open approach to Chinese investment by green lighting the $5 billion takeover this week of Augsburg robotics specialist Kuka, a key supplier to the auto industry. The deal, which will guarantee jobs in Germany for seven years, may make possible a new wave of Chinese investment.

The change in policy became apparent on Tuesday night when Kuka suddenly changed its strategy and said it would back its purchase by Midea, a Chinese maker of kitchen appliances which already owns 13.5 percent in the Bavarian maker of robots that are ubiquitous in the assembly lines of  Daimler, BMW and VW.

Not only will the deal represent the largest ever by a Chinese company in Germany, the concessions that were negotiated to make it possible could form a new standard that will lead to increasing Chinese investment in Europe’s largest economy and industrial center, experts said.

Under the deal, the Chinese overcame German government concerns about losing a strategic player in the country’s all-important auto sector after Midea agreed to guarantee Kuka jobs through 2023, to keep its headquarters in Augsburg and to keep patented information in German hands.

“You currently can see such a form of light touch integration from almost all Chinese investors in Germany,” Lutz Berners, the managing director of Berners Consulting, a Stuttgart consultant to Chinese and German companies, told Handelsblatt Global Edition.

Mr. Berners said Chinese investors are keen to preserve German innovation in the long term,  and are willing to make concessions to ease German concerns about a loss of strategic technology. It would be “senseless,” he said, to attempt to do something with Kuka or other acquisitiosn that weakens German engineering expertise.

The new strategic understanding between Germany and China became apparent when Kuka on Tuesday said it had reached an investor agreement with Midea that included concessions that addressed the concerns of corporate and political leaders in Germany.

Midea committed not to undertake a corporate reorganization of Kuka or to take any action that could lead to a delisting of the company, the companies said in a joint statement.

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