Kuka Deal

Angela Merkel and the Robots

Bundeskanzlerin Angela Merkel (CDU) sieht sich am 14.06.2016 im Industriemuseum in Shenyang (China) eine Präsentation zu Industrie 4.0 an. Merkel ist zu einem dreitägigen Besuch in China. Foto: Rainer Jensen/dpa +++(c) dpa - Bildfunk+++
Angela Merkel visits a factory in China on Tuesday.
  • Why it matters

    Why it matters

    Germany is worried about the loss of technological know-how in a possible takeover of Kuka by Midea.

  • Facts


    • Chinese appliance maker Midea said it wanted to raise its stake in Kuka to at least 30 percent from 13.5 percent.
    • The bid, which values Kuka at €4.6 billion ($5.2 billion), would give the Chinese company effective control.
    • The German government favors a bid by a European firm to prevent technology transfers overseas.
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Angela Merkel just couldn’t get away from the robots.

The planned Kuka Midea deal, where a Chinese appliance maker wants to increase its stake in a German robotics group, has dominated the chancellor’s visit to China this week.

On her third day, Ms. Merkel’s Chinese hosts invited her to Shenyang in the north-east of the country.  In the city’s industrial museum they presented a test construction area with robots building model vehicles. And two of the robots turned out to have been made by Kuka.  Ms. Merkel wanted to know what the Kuka robots did better. The Chinese expert replied that they were more flexible.

Kuka is set to take off in China and there is no doubt that a deal with Midea will help the Bavarian company grow at a rapid rate there. But in Germany, there is still a debate raging about how Chinese Kuka should be allowed to become. This question is being discussed on many levels, also by politicians. Some fear a sell-off of state-of-the-art German technology.

The federal government is very keen for the pioneering company to remain – at least partly – in German hands for the “Industrie 4.0” digitization project. In government circles, there has been talk of a strong German anchor shareholder – also that the government had received a signal that Midea could be happy with up to 49 percent of Kuka’s shares.

At the moment south German industry concern Voith is the largest single shareholder with 25.1 percent, and family entrepreneur Friedhelm Loh has 10 percent.

Voith will have a key role in deciding the future of Kuka.  One scenario is that it simply holds on to its shares, and look out for the interests of the German economy at Kuka. But a source close to Voith was skeptical: Voith is a private, family owned company, and its owners could find the generous offer from Midea irresistible.

“Chinese companies now hardly get involved in companies they have taken over. It does not look as if that will change any time soon,”

Kai Lucks, Mergers & Acquisitions Authority

The Chinese are offering €115 ($129) per share, valuing Kuka at a hefty €4.5 billion. So Voith could almost double its investment. Getting out might also be considered an attractive option, as the strategic opportunities for Voith have been limited since the Chinese have been involved in the company.

But a search for alternative shareholders has been fruitless. German companies have been reluctant to get involved. Industry sources say that Kuka is not important enough for German automobile manufacturers to spend money on it right now.

There is however a chance that other players in the industrial automation sector could become interested, the Wall Street Journal reported Tuesday, citing industry specialists. Zürich-headquartered ABB would consider making a rival bid, should it be solicited by Kuka, people familiar with the matter told the newspaper. A spokesman for ABB declined to comment to the Wall Street Journal.

There are fears that following a takeover, Midea will not keep Kuka independent, but instead integrate its production and management into its own structures. There is still no proof to back up these concerns. Up to now, no Chinese firm has followed up a takeover in Europe by liquidating the takeover target and completely integrating its business in the Far East.

Initial attempts to do this had failed, said Kai Lucks, chairman of the government Mergers & Acquisitions Authority. He said that Chinese companies had learned from this: “Chinese companies now hardly get involved in companies they have taken over. It does not look as if that will change any time soon,” said Mr. Lucks. However, the Kuka case is tricky, because robots play a key role in the German “Industrie 4.0″ project, which focuses on the idea of digitising production.

Kuka will not easily be able to stop the deal. Industry sources point to the precedent of Schaeffler:  In 2008 the automotive supplier Conti put up an energetic defense against a takeover attempt by a smaller competitor.  Finally, Schaeffler shareholders were offered more than 90 percent of the stock. But they were happy with 49 percent, and that was stipulated in an investor agreement. The rest of the shares were parked with banks and put on the market at a later date.

In the case of Kuka there is also doubt on the stock exchange about the outcome of this game of poker. The shares traded at €103 on Tuesday, well below the offer price. Theyhad jumped 4.6 percent to €107.15 by Wednesday afternoon, following the Wall Street Journal report of possible interest from ABB. The stock also got a lift after news agency Reuters reported Tuesday that Midea was planning to publish its takeover offer for Kuka on Thursday.

Whatever the outcome of the bid, it became clear to the chancellor in China that Kuka is not the only successful German industrial company involved in the Industry 4.0 project.

Ms. Merkel’s entourage on the Shenyang museum tour included high-ranking business managers like Siemens boss Joe Kaeser. He watched in silence as Ms. Merkel checked out the test construction area. Mr. Kaeser then asked the hosts: Who constructed the robots’ controlling systems? The reply came a little hesitantly: The controlling system is from Siemens. The Chancellor smiled contently and continued her guided tour.


Stephan Scheuer is Handelsblatt’s China correspondent, based in Beijing.Thomas Sigmund is the bureau chief in Berlin, where he directs political coverage.  Axel Höpner is head of the Handelsblatt office in Munich, focusing on the state of Bavaria’s companies, including Allianz and Siemens. To contact: scheuer@handelsblatt.com sigmund@handelsblatt.com and hoepner@handelsblatt.com

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