By Anne Kauranen and Christoph Steitz
HELSINKI/FRANKFURT (Reuters) – Kone <KNEBV.HE> might sell some parts of Thyssenkrupp’s <TKAG.DE> elevator business if the Finnish firm wins an auction to buy it, the CEO of the world’s No.3 elevator maker said.
Such a move will be necessary to gain antitrust approval, people familiar with the matter have said. Kone is one of at least 10 potential bidders for Thyssenkrupp’s 15 billion euro (£12.97 billion) lifts business.
The group has for years been keen to buy Thyssenkrupp Elevator Technology (ET), the world’s No.4 elevator maker.
But any deal between the two is certain to raise red flags in Brussels, which has already blocked some cross-border deals this year, including a steel joint venture between Thyssenkrupp and Tata Steel <TISC.NS>.
Kone has therefore hired law firm Clifford Chance, a person familiar with the matter said, to work out a plan. This could involve it teaming up with a private equity group that could buy assets in regions where both rivals have dominant positions.
An acquisition would need approval by European competition authorities, but Kone Chief Executive Henrik Ehrnrooth told Reuters that talks with them would only begin once there was “a real case on their table”.
He pointed out that the two companies dominate in different geographies, with Kone being strong in Asia while Thyssenkrupp’s best markets are in the Americas.
“We haven’t discussed selling any of our own assets,” Ehrnrooth said, adding “it could well be that we would have to give up some parts of Thyssenkrupp”.
He also said that Kone and ET were a perfect fit, listing their different geographic coverage, synergies from overlapping operations and the industry’s digital transformation needs.
“The main reason why we are doing this is geographic coverage and to obtain more growth,” Ehrnrooth added after Kone earlier reported a higher-than-expected quarterly profit.
“We have said that we are very interested.”
Shares in Kone and Thyssenkrupp both closed up 1.4%.
Ehrnrooth declined to say what synergies Kone calculates it could squeeze out of merging the two businesses. Danske Bank has estimated that these could be as high as 7 billion euros.
“The synergies would be quite remarkable,” Ehrnrooth said, adding they would “mean staff cuts in some places but our type of business is geographically very dispersed”.
It is still unclear what structure any deal could take – or whether Thyssenkrupp will pursue a listing of the unit instead.
The conglomerate’s top shareholder, the Alfried Krupp von Bohlen und Halbach foundation, said it should not sell too much.
“With regard to dividend payouts it would certainly be best to keep a stake in Elevator, the profitable business, that is as high as possible,” Ursula Gather, the foundation’s head, told German newspaper Rheinische Post.
Gather said it was unrealistic that the foundation, which owns 21% of Thyssenkrupp, could stump up the 350 million euros needed to raise its stake to a blocking minority.
($1 = 0.8996 euros)
(Additional reporting by Christoph Steitz in Frankfurt; editing by David Evans and Alexander Smith)