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Thu 17 Oct 2019 12:18 PM

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Battle for Thyssenkrupp elevators unit heats up

Brookfield Asset Management and a consortium of Advent International, Cinven and the Abu Dhabi Investment Authority remain in the running

Battle for Thyssenkrupp elevators unit heats up
Thyssenkrupp last month named Martina Merz as interim chief executive officer to replace Guido Kerkhoff as it tries to ink a deal for elevators, its most valuable asset, to fund a turnaround.

The battle for Thyssenkrupp AG’s elevator unit is heating up as rival bidders Kone Oyj and Blackstone Group Inc. position themselves with potential partners for a deal that could fetch more than 15 billion euros ($16.5 billion), people familiar with the matter said.

Kone, the Finnish elevator maker, is in talks with CVC Capital Partners about teaming up in an offer for the business, according to the people. Blackstone and Carlyle Group LP have partnered for their own planned joint bid, the people said, asking not to be identified because the information is private.

Shares of Thyssenkrupp jumped as much as 5% in Frankfurt trading Wednesday. Suitors are still waiting for Thyssenkrupp to make the unit’s detailed financial information available before making bids in the coming weeks, the people said.

A partnership between Kone and CVC would be a way to address significant antitrust concerns, with CVC acquiring elevator assets in places such as Europe where Thyssenkrupp and its Finnish rival have significant overlap, they said. The talks with CVC are one of several partnership options that Kone is exploring, according to the people.

Antitrust Review

CVC is also discussing whether it could bid independently in addition to pursuing a joint offer with Kone, two of the people said. No final decisions have been made, and there’s no certainty the suitors will proceed with formal bids, the people said.

Representatives for Carlyle, CVC and Kone declined to comment. Representatives for Blackstone and Thyssenkrupp weren’t immediately available to comment.

Kone and Blackstone will still face stiff competition from other suitors. Brookfield Asset Management and a consortium of Advent International, Cinven and the Abu Dhabi Investment Authority remain in the running, according to the people. The other strategic bidder is Japan’s Hitachi Ltd., the people said.

Clayton Dubilier & Rice, EQT AB, Permira and KKR & Co. have dropped out of the process, the people said. Representatives for Advent, Brookfield, Cinven, KKR and Permira declined to comment, while a representative for Hitachi said “no formal decision has been made in this regard.” CD&R and EQT didn’t immediately respond to requests for comment.

Replacing Leader

Thyssenkrupp last month named Martina Merz as interim chief executive officer to replace Guido Kerkhoff as it tries to ink a deal for elevators, its most valuable asset, to fund a turnaround. The beleaguered German conglomerate plans to raise much-needed cash from the sale and also restructure or dispose of other units, such as automotive components and heavy plate steel.

The departure of Kerkhoff, who preferred selling only a minority stake in the company’s crown jewel, has fueled speculation that Thyssenkrupp might now be more open to selling the entire business. An initial public offering is also still being prepared.

Kone, whose CEO Henrik Ehrnrooth has said “the complementary fit of these two companies is just second to none,” is looking for creative ways to address competition concerns. Thyssenkrupp wants to avoid a long antitrust review and a repeat from earlier this year when European regulators derailed a planned steel venture with Tata Steel Ltd. Buyout firms would avoid antitrust hurdles, but Kone would potentially be able to make a higher offer and generate more cost savings, the people said.

Buyout firms have been competing fiercely to buy assets being sold by European companies. Earlier this month, a consortium led by EQT completed the acquisition of Nestle SA’s $10 billion skincare division. A slew of private equity firms were also pursuing Bayer AG’s veterinary medicine unit before the German company decided to sell it to Elanco Animal Health Inc.

CVC would be taking a page out of its previous playbook if it teams up with Kone to secure some of the assets. Linde AG and Praxair Inc. won a long U.S. antitrust battle for their $46 billion industrials gases merger last year only after selling significant assets to CVC and its partner Messer Group GmbH.

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