Leveraged buyout firm Kohlberg Kravis Roberts & Co. is discussing a purchase of the Mannesmann Plastics Machinery AG group of equipment suppliers from Siemens AG, according to a report from Reuters news agency and heard independently by several analysts.
One analyst, Andreas Willi of J.P. Morgan Chase & Co. in London, said that Siemens clearly has MPM up for sale and would like to sell it as quickly as possible. But the business, the world's largest plastics machinery company, has underperformed during the past year, making it difficult to sell the assets, Willi said.
Another potential buyer, London-based equity firm Apax Partners & Co. Ventures Ltd., nixed a deal to buy MPM in October after re-evaluating the company. Apax had announced that a deal was set before changing its mind.
KKR might not be the only buyer looking at MPM, Willi said. With credit terms loosening this year, other equity firms might evaluate the assets, he said.
``When it was up for sale the first time, there was quite a lot of buyer interest and a range of sponsors,'' said Willi, who said he had heard the KKR/Siemens rumors but could not confirm them. ``I'm sure this time that KKR is not the only one. But their offering to buy a whole arrangement of companies could make them more attractive.''
Contacted after Reuters broke the story June 6 in Europe, officials from SMS AG and Milacron Inc. declined to comment. The two plastics machinery makers had expressed past interest in MPM companies.
New York-based KKR, a powerhouse investment firm that has raised more than $16 billion of equity capital, is talking to Siemens about purchasing MPM equipment brands Krauss-Maffei, Van Dorn Demag, Demag Ergotech, Netstal Maschinen, Berstoff and Billion, Reuters said. Mannesmann's Demag Cranes and Components, which makes large overhead cranes for factories, also could be among those in the buyout package, sources said.
Siemens sold another business that makes mobile cranes in May.
Siemens, based in Munich, Germany, would like to receive 1.5 billion to 2 billion euros ($1.4 billion to $1.9 billion) from KKR for the equipment group, including machinery and the overhead crane operations, according to Reuters. The equity firm is backed by financing from Deutsche Bank AG and Hypovereinsbank, according to the report.
Spokeswomen from Siemens and KKR declined to comment. ``We don't comment on these kinds of rumors,'' said Sabine Metzner of Siemens. MPM Chairman Pepyn-Rene Dinandt also declined to comment.
A sale is far from complete, said one London-based investment source familiar with the negotiations. KKR has been known to conduct preliminary negotiations and then walk away from a deal before it reaches its latter stage, the source said.
Officials of plastics machinery makers that had looked at MPM in the past were keeping mum after the press reports about KKR. SMS officials last year publicly expressed interest in MPM - both before and after the Apax deal fell apart. SMS, based in Dusseldorf, Germany, makes Battenfeld, American Maplan and Cincinnati Extrusion equipment.
Contacted June 12, the top SMS executive, Helmut Eschwey, said he saw the Reuters report. He gave a ``no comment'' when asked if SMS still is interested in buying MPM. Eschwey also said SMS has not been in contact with KKR.
Last year Daniel J. Meyer - then the top executive of Milacron, the largest U.S. plastics machinery company - said that Cincinnati-based company had looked at buying MPM, but backed away and did not bid.
Milacron did not return telephone calls for this story.
Several analysts who cover Milacron have doubted whether the publicly traded company, which suffered from the collapsing U.S. plastics machinery market, has the financial strength to make a significant acquisition. But that could change.
On May 6, Milacron announced it was selling its metal-cutting tool operations in Europe and India, using the money to reduce debt. Now analysts say Milacron probably will sell off the U.S. metal-cutting tool businesses, too - further improving the company's balance sheet. If that happens, Milacron would become a ``pure-play'' plastics equipment company, ready to do more deals, they said.
KKR has investments in several plastics processing companies, including Toledo, Ohio-based Owens-Illinois Inc. and AEP Industries Inc. of South Hackensack, N.J.
Plastics News senior reporter Bill Bregar contributed to this story.