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UPDATE 3-Japanese bid boosts shares in German machine-tool maker DMG
January 22, 2015 / 9:42 AM / in 3 years

UPDATE 3-Japanese bid boosts shares in German machine-tool maker DMG

* Japanese partner offers 27.50 euros per share

* Offer values Germany’s DMG at almost 2.2 bln euros

* Shares jump more than 12 percent (Adds executives and analyst comment, background, updates shares)

By Georgina Prodhan and Anneli Palmen

FRANKFURT/DUESSELDORF, Germany, Jan 22 (Reuters) - Shares in DMG Mori Seiki AG jumped more than 12 percent after its smaller Japanese partner launched a takover bid that the businesses expect to cement the German company’s position as global market leader in machine-tool manufacturing.

Japan’s DMG Mori Seiki Co Ltd announced its 27.50 euro-per-share offer for all outstanding shares late on Wednesday, pitched nearly 30 percent above the German stock’s volume-weighted average price over the past three months and valuing the company at almost 2.2 billion euros ($2.6 billion).

The two companies have expanded their partnership over recent years, with Tokyo-listed DMG increasing its stake in the German business, formerly called Gildemeister, to 24.3 percent in 2013.

The proposed takeover would be one of the biggest to date of a German company by a Japanese peer, creating a business with a combined workforce of 11,600 and about 3.5 billion euros in annual sales.

The companies said the deal woul help the German business to lift its market share to 10-15 percent from 8-9 percent, with their top executives trumpeting expected economies of scale and efficiency savings that would aid expansion beyond their core domestic markets of Germany and Japan.

“I‘m quite confident that by 2020 we can grow to 15 percent (market share),” Masahiko Mori, president of DMG Mori Seiki Co Ltd said on a conference call.

The German company’s chief executive, Ruediger Kapitza, urged shareholders to accept the offer, adding that 2015 is likely to be more volatile than 2014. Though the company turned in a record performance last year, Kapitza said profit margins and orders could suffer this year.


By 1501 GMT the shares were up 12.4 percent at 28.76 euros, almost 5 percent above the offer price.

Thomas Rau, equity analyst at boutique research firm Montega, said: “For me, the offer price is clearly too low and absolutely unattractive for the shareholders of DMG Mori AG.”

He said the offer still valued the company below its peers.

According to Thomson Reuters data, the German company’s enterprise value before the offer was 6.2 times 2015 estimated core earnings, below a median of 7.7 times for a peer group including Jungheinrich, Krones and Kion .

Specialising in cutting tools used in the automotive, oil, construction and aerospace sectors, among others, DMG Mori serves customers including such illustrious German names as Daimler, Bosch and Siemens.

“This step may now tilt influence more towards DMG (Japan) in what we have considered a ‘merger of equals’ before,” DZ Bank analyst Jasko Terzic said.

The companies said they planned to keep both their Frankfurt and Tokyo stock market listings for the time being.

DMG Japan, which is expected to have made operating income of about 14 billion yen ($119 million) in 2014, said it aimed to acquire at least 50 percent of the German company’s stock, financed through a bank loan of up to 1.64 billion euros.

The offer will run from Feb. 11 to March 11, with the results to be announced on March 16, Japan’s DMG said. It expects the deal to be completed by June. ($1 = 0.8634 euros) ($1 = 117.5900 yen)

Writing by Maria Sheahan; Editing by David Holmes and David Goodman

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