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KraussMaffei, ChemChina and Onex, the private equity firm that has owned KraussMaffei since 2012, have announced that China’s leading chemicals group, state-owned China National Chemical Corporation (ChemChina), has agreed to acquire KraussMaffei Group from Onex Corp. for a cash enterprise value of €925 million, or just over $1 billion. The announcement, made on January 10th, confirms a Reuters report that appeared three days earlier, stating that an unnamed Chinese buyer hoped to buy KraussMaffei before the Chinese New Year in early February.

Karen Laird

January 11, 2016

5 Min Read
ChemChina takes over ownership of KraussMaffei Group for €925 million

ProductionInjectionMoldingMachinesMunich.jpgBeijing-based ChemChina is a strategic and long-term oriented investor who, said Frank Stieler, CEO of the KraussMaffei Group, has been interested in the Group for many years. Ranking 9th in the global chemicals industry, ChemChina is one of the largest chemicals groups in the People’s Republic of China, with revenues in the neighborhood of €39 billion—“comparable to Bayer,” said Stieler during the phone conference about the change of ownership today. In the high-end manufacturing segment, the China National Chemical Equipment Corporation (CNCE) is active in the rubber and chemicals machinery businesses in China.

Hence, while the KraussMaffei Group is already one of the world’s leading suppliers of machinery and systems for producing and processing plastics and rubber, this transaction will considerable accelerate its planned expansion in China, in light of potential business synergies due to the companies’ complementary product portfolios. According to Stieler, KraussMaffei generated revenues in 2014 of approximately €1.1 billion ($1.47 billion) and is expected to achieve year-on-year revenue growth of approximately 10 percent for 2015.  He declined, however, to give the percentage currently accounted for by sales in China, stating only that “the Chinese market is currently a low double-digit number.”

He noted that the change of ownership is well timed. “We are a late player in this market,” he said. “Now we see the market changing, with a higher demand for quality products. It’s a good time for KraussMaffei to get involved.”

“We see the current developments on the Chinese stock market as an adjustment process, triggered by the change in strategy in the latest five-year plan, with its greater emphasis on quality and sustainability,” he added. “Companies producing mass products are suffering. But the products coming out of our machines are in high demand. As part of ChemChina, we expect to considerably accelerate our growth strategy, especially in China and Asia, and to further strengthen the Company in Germany and Europe.”

ChemChina’s focus on management expertise, next to the quality and value of the acquired companies, is another reason for optimism about the deal.

“A chemicals producer is the longest-term thinking player in the market,” said Stieler. “They don’t look forward in terms of three years, but in terms of thirty years. And they understand the need for investment, and that it is not just the numbers that count, but also quality, technology and management skills. An owner that recognizes this is good for this business,” he declared.

He also emphasized that ChemChina had manufacturing sites of its own, and that part of the concept of the transaction was for ChemChina to obtain support from KraussMaffei to upgrade these facilities and to assist in providing necessary management skills. This was an aspect that Jianxin Ren, Chairman of ChemChina, also highlighted in the press release announcing the acquisition.

There, Jianxin Ren pointed out that ChemChina was investing in the KraussMaffei’s strong management team and its technological expertise. “We believe this will benefit our Chinese subsidiaries and position the chemical machinery business of ChemChina, which build and sell equipment for the rubber and chemical industry, to become a pioneer in achieving the “Made in China 2025” program,” said Jianxin Ren, referring to China’s 10-year quality program aimed at comprehensively upgrading Chinese industry by emphasizing innovation-driven, high-quality manufacturing and to raise the domestically-produced proportion of key manufacturing components to 70% by 2025.

The KraussMaffei Group’s headquarters will remain in Munich and the operating and corporate responsibility for the Company will stay in Europe. This applies in particular to production, technology, patents as well as research and development. “We are strengthening our company with one of the leading global engineering groups, encompassing a 178-year corporate history. In doing so, we expect that KraussMaffei Group will maintain its identity and independence,” said Jianxin Ren.

“The growth potential of the KraussMaffei Group is tremendous, especially through improved access to the Chinese market, which we can make possible.”

Past acquisitions have taught ChemChina that companies do best when allowed to keep their own centers of expertise. Recognizing that the capacities at KraussMaffei are the strongest at the sites at which the company currently operates, KraussMaffei will therefore continue to operate as a German company with a supervisory board based on co-determination. “It will have its own managing board, made up of the same members as today,” Stieler clarified.  All existing collective agreements and location-based commitments will remain unchanged. As a result, the deal also has the blessing of the employees’ organization and the German metalworkers’ trade union.

Peter Krahl, Chairman of the works council of the KraussMaffei Group said that the transaction was a significant opportunity for the KraussMaffei Group and its employees. “We are confident that through further growth the existing jobs in Germany and Europe will be secured and expanded,” he said.

At present, the Company has approximately 4,500 employees globally, of which 2,800 are based in Germany. According to Stieler, KraussMaffei intends to increase its workforce in 2016, adding 150 people in Germany this year alone.

Following Onex’s acquisition in 2012, KraussMaffei Group demonstrated sustained improvement in its financial and operational performance. “We thank Onex for constructively supporting our Company over the last three years, which has allowed us to achieve record performance in 2015 and has positioned the Company well for the future,” commented Stieler.

“Over the past several years we’ve worked closely with KraussMaffei Group’s management team to improve the performance of the company, further strengthening its leadership position in the global plastic and rubber processing industries,” said David Mansell, a Managing Director of Onex. “We’d like to thank all of KraussMaffei Group’s employees and management for their dedication and hard work,” added Mansell.

The transaction is subject to closing conditions including customary regulatory approvals.

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