Japan's Daikin industries (IW 1000/300), the world's biggest air-conditioner company, said Wednesday it would acquire rival Goodman Global in a $3.7 billion deal as it looks to tap the huge North American market.
The acquisition would see the Osaka-based firm pick up the much smaller Goodman to add a "strong fourth pillar" to its key global operations in Japan, China and Europe.
U.S.-based Goodman focuses on North America, the world's single biggest heating, ventilation and air-conditioning market, and has an expertise in central air conditioning, said Daikin.
Gains Ducted-Style Expertise
"Most systems in this market are ducted-style, a segment where we have little presence," Daikin Chief Executive Noriyuki Inoue said in a statement.
"Goodman and Daikin can enjoy a complementary relationship by having more channels in the market to offer Goodman's market-leading ducted products and Daikin's existing products," he added.
However, investors were unimpressed, with Daikin's Tokyo-listed shares falling 3.53% to 2,073 yen on Wednesday.
Ratings agency Moody's also threw cold water on the deal, saying it had put Daikin's credit rating on review for a possible downgrade even though the acquisition would boost the Japanese firm's presence in North America.
"The transaction will be financed with a combination of debt and cash on hand," it said in a statement after the deal was confirmed.
"[It] will have a significant impact on the size of Daikin's balance sheet and will negatively affect" its financial profile.
Transaction Could Close in Q4
The purchase of Goodman, which has about 4,500 employees and posted sales of $2.1 billion last year, would be completed in the fourth quarter of 2012, assuming regulators approve the deal, Daikin said.
The Japanese firm, which has 44,000 employees worldwide and posted $15.52 billion in sales in its latest fiscal year, had started acquisition talks two years ago, but they were put on ice after last year's quake-tsunami disaster and atomic crisis.
The move comes as Daikin fends off stiff competition from rivals including China-based Gree Electric Appliances and U.S.-based Carrier Corp.
Japanese companies have been aggressively seeking mergers and acquisitions abroad in recent years, taking advantage of the yen's strength to diversify their operations and make them globally competitive.
Copyright Agence France-Presse, 2012