January 14, 2011 5:52 pm

Daikin considers purchase of US rival

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Daikin, the Japanese air conditioner maker, said it was weighing a possible acquisition of US company Goodman Global in a deal that would make the Japanese group the world’s largest air conditioner manufacturer by sales.

Noriyuki Inoue, Daikin chief executive, told reporters in Osaka that his company had been approached by Goodman’s owners, the San Francisco-based private equity firm Hellman & Friedman, over a possible sale.

Hellman & Friedman bought Goodman in October 2007 for $2.65bn, including debt, and is understood to be seeking at least $4bn.

If Daikin buys Goodman it would be the Japanese company’s second large international acquisition since 2006, when it paid $2.1bn for OYL Industries of Malaysia. Mr Inoue said Daikin was looking to double its revenues to Y2,000bn ($24bn) in the next five years.

“We want to make tie-ups, joint ventures and acquisitions an everyday practice,” he said, adding that Daikin was looking at other potential targets in the US besides Goodman.

He cautioned, however, that while he was “considering” buying Goodman, the two companies were not in direct negotiations.

“It is necessary to make an all-around judgment. There is no need to rush.”

Daikin currently ranks second among global air conditioner makers, with a market share of 9 per cent, one point behind United Technologies, the US conglomerate that sells heating and cooling equipment under the Carrier brand.

Adding Houston-based Goodman, which specialises in residential and small-scale commercial systems and had revenues of $185m in 2009, would lift Daikin narrowly into the top spot.

Daikin had Y179bn in cash as of September and would need to raise funds to buy Goodman. Addressing shareholder concerns that Daikin would issue new equity to finance a deal, Mr Inoue said Daikin would “need to avoid that sort of fundraising”.

Daikin’s shares, nevertheless, fell 2.33 per cent on the Tokyo Stock Exchange on Friday.

Daikin would be aided in any acquisition by the strength of the yen, which has underpinned a rise in foreign investment by Japan-based groups.

Japanese companies have turned to acquisitions to compensate for slow domestic growth.

The value of their international acquisitions doubled last year to $38.5bn, according to Thomson Reuters.

As a result of the sustained building boom in emerging economies, the global market for heating, ventilation, air conditioning and refrigeration has grown 5 per cent a year on average since 1993, according to Bernstein Research.

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