China Focus: China's Midea taps new business with Kuka bid

Chinese home appliances giant Midea Group is looking to tap new growth with its latest bid for Kuka, which values the German robot maker at 4.6 billion euros (5.1 billion U.S. dollars).

"Midea is seeking and fostering a new growth drive to cope with a potential recession in the home appliances industry," said Liu Buchen, chief adviser with Kuafo Consulting. "The robot industry is regarded as one of the most promising," he said.

Midea's revenues in 2015 declined 2.3 percent year on year to 138.4 billion yuan (21.1 billion U.S. dollars).

Midea announced Wednesday that it has offered to pay 115 euros (129 U.S. dollars) in cash per share of Kuka, a premium of 36.2 percent over the closing price on Tuesday.

Midea currently holds a 13.5-percent stake in Kuka. Under German law, it is obliged to make the 4-billion-euro offer for the remaining shares as the bid would raise its stake above 30 percent.

One of the world's top four robot makers, Kuka has a workforce of 12,000 and its 2015 revenues reached nearly 3 billion euros.

Midea pledged to maintain Kuka's independence, saying that it has no plan to seek a domination agreement or delist the company. It also said it will not change the headquarters or reduce the workforce.

Fang Hongbo, chairman of Midea, said Kuka's independence can be guaranteed, despite the bigger stake. "Meanwhile, we can seek cooperation to drive growth, particularly in the Chinese market," Fang said.

The investment is in line with Midea's two-wheel strategy: smart homes and smart manufacturing, Fang said.

Midea said it will use Kuka's expertise in industrial robots and automation to improve its efficiency while promoting automation solutions to other companies in the country.

The two companies can develop service robots, offering a wide range of products to meet rising market demand.

The Executive Board and the Supervisory Board of Kuka will evaluate the offer document and issue its opinion on the offer, Kuka said.

Last August, Midea announced it would set up two joint ventures with Japanese automation giant Yaskawa.

Midea itself has demand for automation. It announced last year it would invest 5 billion yuan in automotive production lines and increase its industrial robots from 1,000 to 10,000.

Midea's rival, Gree, has made similar inroads into new business as traditional business faces waning sales.

Gree announced in February that it would buy Zhuhai Yinlong New Energy Co. to enter the booming electric vehicle market.

Gree reported falling performance last year as revenues slumped 29 percent year on year to 97.7 billion yuan.

Similar moves by major Chinese home appliance makers showed that they need to either enter new business or use overseas takeovers to expand their international markets for sustainable growth, Liu said. Endi