MUNICH (Updated Sept. 21, 3 p.m. ET) — News reports, backed up by several industry sources, say that the sale of KraussMaffei Group — the world's largest manufacturer of plastics equipment — could be coming soon by Madison Capital Partners.
Reuters and the German financial press are reporting an undisclosed Chinese machinery group is poised to buy KraussMaffei from Madison Capital, a Chicago-based investment firm. Two industry sources told Plastics News that a U.S. entity — probably a private equity company — was still in the running as of Sept. 21.
The field appears to be narrowing. Another source said that two or three private equity firms have dropped out of the process in recent weeks.
Regardless of who is the ultimate buyer, the sources said negotiations appear to be in the final stages.
“It's more than smoke going on. I really do expect a sale in two or three weeks,” said one industry source. Another said: “Clearly, they're on the block.”
The knowledgeable industry sources spoke to Plastics News on the condition they would not be identified.
Reuters cited “two people close to the transaction,” who were not identified in its Sept. 20 story.
The news service does not name the possible Chinese buyer, but lists three Chinese companies that were “initially interested” but are no longer are in talks with Madison Capital: major plastics machinery players Haitian International Holdings Ltd. and Chen Hsong Holdings Ltd., and a third company, called Long Hong.
Meanwhile, sources said that Netstal Machinery Inc., the U.S. operation of KM Group unit Netstal-Maschinen AG, is relocating from Devens, Mass., to Florence, Ky. — and moving in with KraussMaffei Corp., the group's North American headquarters. Netstal has already moved its parts warehouse to Florence.
Netstal and KraussMaffei are expected to formally announce the move soon.
Earlier this year, officials of Munich-based KraussMaffei Group and Netstal, of Näfels, Switzerland, said they were combining their marketing functions and would pool their engineering efforts. The two companies are maintaining an independent market presence and manufacturing operations.
Some industry observers saw that move as a way to boost finances before a sale.
KraussMaffei employs 4,000 worldwide, building injection presses, extruders and reaction injection molding machines. The group makes well-known brands of KraussMaffei, Berstorff and Netstal. KraussMaffei Group generated record order income of 1.1 billion euros ($1.5 billion) for its fiscal year ended Sept. 30, 2011. Financial results are not available for this fiscal year.
Reuters reported that Madison Capital hopes to get as much as 700 million euros ($910 million) for KraussMaffei Group. That is the same figure Bloomberg reported in a story three months ago.
Press reports say Madison Capital has retained Goldman Sachs.
Madison Capital bought the plastics machinery group in 2006. That's six years ago, a fairly long time for private equity ownership, which has prompted industry observers to wonder when Madison Capital would cash out and sell KM Group, to pay back investors. Machinery sales are rebounding from the Great Recession and capital is freeing up.
Contacted about the Reuters report, KM spokesman Imre Szerdahelyi said company officials “don't comment on rumors.”
Larry Gies, president and CEO of Madison Capital, did not return a telephone call seeking comment.
Officials of KM and Madison Capital also have declined to comment on past media reports.
A German financial newspaper reported in 2008 that Madison Capital was preparing KM Group for an initial public offering. In mid-June of this year, Bloomberg reported that Madison Capital was exploring the sale of KraussMaffei Group, again citing undisclosed sources.