Combined Strength Takeover Bid Boosts DMG Mori Seiki

The market value of the German machinery maker shot up after last week's takeover bid by a Japanese partner.
Business as usual, just more of it.

German machine-tool manufacturer DMG Mori Seiki and its same-named partner from Japan have taken the next step in their relationship, with the announcement of a takeover offer from the smaller, family-owned Japanese company last week.

The German MDAX company – formerly called Gildemeister – and its Japanese partner have been consolidating their operations since 2009. They have already synchronized machine design, brand-and-marketing work and service departments.

The Japanese company wants to increase its share of the business from 24.3 percent to at least 50 percent. This would create the largest company in the sector, with almost 12,000 employees and sales of €3.5 billion.

“Our products perfectly complement each other,” said the head of the German partner, Rüdiger Kapitza, in support of the merger. The share price leaped to a record high after the announcement.

With complete integration, we can enjoy economies of scale and improve efficiency. Rüdiger Kapitza, Chief executive, DMG Mori Seiki

In the mid term, Mr. Kapitza said he expected a share of between 10 and 15 percent of the global market in the segmented machine-tool branch. Up to now, both firms combined account for an 8 percent global market share.

“With complete integration, we can enjoy economies of scale, strengthen research, achieve savings through joint purchases and improve efficiency,” said Mr. Kapitza.

He hopes for growth especially in Asia and America, where the firms each earn 16 percent of their revenues. With a market share of more than 50 percent, Europe will, he said, remain the largest outlet for the products.

The Japanese are offering the shareholders of DMG Mori Seiki €27.50 per share, putting the value of the German company at almost €2.2 billion, an increase of 7.5 percent in comparison to the closing figure on Wednesday, before the announcement.

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“That's an absolutely fair value,” said Mr. Kapitza. “The company has never been worth so much.”

Nonetheless, the share price of the machine-tool manufacturer leaped to a record high on Friday. It climbed intermittently by 12 percent to more than €28, as investors speculated about a better offer. But Mr. Kapitza was clear that would not happen. “I will argue against adding a single cent to the offer," he said.

This is not the first time that a Japanese company has taken over a traditional, mid-sized German business. One year ago, the building-materials firm Lixil purchased the bathroom-fixture company Grohe. There are also technological partnerships such as those between Daimler and Nissan Renault, or between BMW and Toyota.

There are clear advantages to both the Japanese and the German companies in such hookups. The German partner gains access to the booming markets of Asia, and Japan in particular, while the Japanese partner can take advantage of the best in engineering and the brand-boosting effect of partnering with a premium manufacturer.

 

Martin Kölling is the Handelsblatt Tokyo correspondent. Martin Wocher is reports from Düsseldorf. To contact the authors: [email protected], [email protected].