Kone Corporation (Kone), a Finland-based elevator and escalator company, has confirmed on January 28, 2020, that it has submitted a non-binding offer to acquire thyssenkrupp AG (TKAG) unit of Elevator Technology business. A German multinational conglomerate, thyssenkrupp deals with the operations from industrial engineering to steel production. Several investors participated in the bidding for TKAG and the suitor for the company would be sorted out by the end of February 2020.
Kone’s Non-Binding Offer
Kone’s bidding on Tuesday was the highest offer for the buyout of TKAG’s elevator unit. The Finnish elevator company has offered about 17 billion euros ($18.9 billion) for TKAG’s subsidiary though Kone officials claimed that it might change its decision about the bid.
Following the news of the buyout, a German labor group leader attacked the bidding company saying “the price alone would not cut it” and the acquisition might have a major impact on the existing employees of the German company. Kone has been looking for the tie-up between the two world’s leading giants of the elevation industry and has made a non-binding bid a day after a deadline expired.
The Kone’s CEO, Henrik Ehrnrooth said in a statement on Tuesday, “The proposal is based on certain assumptions about the business, and the terms of a potential binding offer could deviate from the current non-binding offer.”
According to Reuters, “Kone’s offer represented a premium of about 1 billion euros (844 million pounds) over the best offer from leading competitors from the private equity world.” However, a labor leader who is the deputy supervisory board chairman of TKAG’s elevator unit and also a member of the powerful IG Metall union, Knut Giesler asserted, “Offer size alone is not enough.”
Referring to the potential of cutting off substantial jobs of the existing employees, Giesler added, “It has to be a safe deal, a safe transaction for the remaining part of Thyssenkrupp and there have to be assurances for the employees of the elevator division.” He urged TKAG to keep other options open including a sale to a strategic partner, a private equity firm or listing on the stock exchange.
TKAG Will Pick a Suitor Next Month
Other suitors including Advent International, and Cinven and the Abu Dhabi Investment Authority which are currently working with Germany’s RAG Stiftung are the main contenders for the bidding of the elevator unit buyout.
As Reuters reported, the bidding for TKAG’s unit would be observed under “a bidding team consisting of Blackstone, Carlyle and the Canada Pension Plan Investment Board and a third group comprising Canada’s Brookfield, and Singapore’s Temasek.” A source explained, TKAG would continue its auction for buyout and allow the bidders to amend their offers by mid-February 2020.
Confirming Japanese Hitachi also submitted a bid, Giesler said, “It’s a beautiful gamble at the moment and one where you don’t show your cards too early.” He said a buyer would be selected by the mid or the end of February. Kone’s boss, Ehrnrooth said earlier on Tuesday that the company had interested in the elevator unit and saw significant “scale advantages”.
In the statement, Ehrnrooth described the deal would be “highly complementary geographical footprint of the businesses, substantial value creation on offer from synergies, and joint innovation potential in an operating environment increasingly shaped by digitalization.” By the end of Tuesday, the shares in TKAG and Kone closed up at 5.3% and 4.9% respectively.
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