Siemens AG announced July 26 what nearly two months of speculation and news stories already were saying - that Siemens is selling the world's largest plastics equipment maker, along with six other businesses, to U.S. buyout firm Kohlberg Kravis Roberts & Co.
What does the ownership change mean to the six member companies of Mannesmann Plastics Machinery AG? Munich, Germany-based MPM generated 2001 sales of about 1.2 billion euros ($1.07 billion) from some of the global plastics industry's best-known brand names: Krauss-Maffei, Van Dorn Demag, Demag Ergotech, Netstal, Berstorff and Billion. The second-largest plastics equipment maker is U.S.-based Milacron Inc., with related sales of $662.4 million last year.
KKR and Siemens did not return a call seeking comment. But one analyst who follows Siemens in Germany thinks KKR will hang onto the MPM companies - at least until the capital equipment market improves. KKR paid Siemens about $1.7 billion for an 81 percent stake in seven companies, including MPM.
``What I believe is they will keep the machinery part,'' said Frank Rothauge, an analyst with privately held bank Sal. Oppenheim. MPM is the biggest of the seven companies in the deal. ``[MPM] is the core of the unit. The rest are only additions,'' he said in a telephone interview from Frankfurt, Germany.
Rothauge thinks KKR likely is paying less than the 800 million euros that Apax Partners & Co. Ventures Ltd. was widely reported to have offered for MPM before backing out of the deal.
Rothauge said the price probably came down because of the poor market for plastics machinery. But he said KKR, one of the world's largest private equity investment firms, can afford to wait until the market picks back up again before selling.
In addition to MPM, the other companies that KKR bought from Siemens are the Demag and Gottwald crane operations, Siemens Network Systems, Siemens Ceramics Division, a gas springs business called Stabilus, and Siemens Metering, which makes electricity meters.
Siemens, a German industrial giant in Munich, retained a 19 percent stake in the companies - a fact that Rothauge said he does not like. In a Dow Jones report out of Berlin, a Siemens spokesman said it shows the company ``believes in the future of the businesses.'' But Rothauge suspects it boils down to dollars and cents.
``I believe that KKR had a restriction up to which amount they want to spend, in order to achieve a reasonable rate of return,'' the analyst said.
MPM equipment - mainly injection presses, with some extrusion and polyurethane equipment - makes plastic parts around the world. MPM member firms employ some 6,400.
Officials from the six MPM units either declined to comment or were not available after the announcement. Until the announcement, Siemens had declined to comment after press reports about KKR surfaced in Europe.
The KKR news followed a July 24 announcement detailing much closer integration between MPM sister companies Van Dorn Demag Corp. of Strongsville, Ohio, and Demag Ergotech GmbH of Schwaig, Germany.
Siemens officials approved of the move, said Helmar Franz, executive managing director of Demag Ergotech. Contacted after Siemens' KKR announcement, Franz said the unified structure was not created to form a package from the U.S. and German firms, which eventually might be spun off by KKR to another buyer.
``Clearly, no. That was not a consideration at any time,'' Franz said. He said the integration was part of a long-term plan to strengthen both companies.
KKR created a holding company, Demag Holding sarl (Luxemburg), to purchase the Siemens units.