Swiss elevator maker Schindler would embark on an all-out antitrust offensive in the courts to stall any deal to combine Thyssenkrupp’s lift division with rival Kone (KNEBV.HE), board member Alfred Schindler told Reuters. His comments came a day after the deadline for binding bids for Thyssenkrupp Elevator, which Finland’s Kone and three private equity consortia are looking to buy in a deal sources say could be worth up to 17 billion euros ($18.6 billion).
A combination of Kone and Thyssenkrupp Elevator would create the world’s largest lift maker, leapfrogging the market leader Otis, which is owned by United Technologies’ (UTX.N), and Schindler, currently in second place globally.
“We would probably file lawsuits in Europe, the United States, Canada, China and possibly Australia. These cases would take at least three to four years,” Schindler, who currently serves as the Swiss company’s chairman emeritus, said. He said he would expect other rivals to take legal action in the event of a sale to Kone: “You can safely assume that neither Otis nor Schindler will simply accept being driven out.”
Thyssenkrupp and Otis declined to comment. A spokeswoman for Kone said the company continued to believe there was room for consolidation in the sector.Shares in Kone were 3.8% lower following Schindler’s comments to Reuters while Thyssenkrupp was 1% higher. Once a symbol of Germany’s industrial power, Thyssenkrupp is struggling with 12.4 billion euros of debt and pension liabilities after years of ill-fated investments and needs to raise money from its prized elevator division. Thyssenkrupp plans to decide what it will do with the business by the end of February. Besides a full or partial sale, it is also pursuing plans for an initial public offering, though sources said this was becoming less likely.
A supervisory board meeting is scheduled for Feb. 27 and a decision on the fate of the elevator business could be made then, two people familiar with the matter said. Solely based on deal value, Kone and a consortium consisting of Blackstone (BX.N), Carlyle (CG.O) and the Canada Pension Plan Investment Board look best-placed to enter the final round, people familiar with the matter said.
RULES OF WAR
Kone has made a non-binding bid of 17 billion euros while the consortium has come in at about 16 billion. It was not immediately clear whether had Kone improved its offer. A consortium comprising Advent, Cinven [CINV.UL] and the Abu Dhabi Investment Authority as well as a group made up of Canada’s Brookfield (BAMa.TO) and Singapore’s Temasek [TEM.UL] are also part of the race, sources have said.
While an outright sale to Kone would probably raise the most cash for the beleaguered conglomerate, Thyssenkrupp is concerned it might trigger antitrust investigations in a number of markets where the combined company could become a dominant player.
If Kone is selected, the deal is expected to result in lengthy antitrust reviews in Europe as well as the United States which could lead to the sale of some assets to rivals to secure regulatory approval. "Such a hypothetical takeover would ... have considerable effects on the structure of the relevant markets and most likely lead to significant negative impacts on effective competition in many markets," DICE Consult said in a report here last week.
Kone has drawn up plans to hand Thyssenkrupp’s European assets to private equity firm CVC [CVC.UL] but the European Commission typically prefers industrial buyers that can compete on a stronger footing with the firm offloading specific assets.
At the moment, Kone is the world’s third biggest elevator maker, followed by Thyssenkrupp and Japan’s Hitachi (6501.T). Schindler served as the company’s CEO from 1985 until 2011 and his assessment carries significant weight as the Schindler and Bonnard families, and parties related to them, hold 71.1% of the company’s voting rights. Schindler, who transformed the Swiss company into a global player, said besides legal steps, it would also intensify its operational efforts to fight any merger between the two rivals.
“There will be a technology war. It is already ongoing but it will intensify massively,” he said, without giving specifics. “Surprise lies at the heart of any defense strategy. A strategy that you lay out in advance would go against any rule of warfare.”