Lixil Joins DBJ To Acquire Grohe For $4.13 Billion

Lixil Joins DBJ To Acquire Grohe For $4.13 Billion

LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) teamed up with the Development Bank of Japan (DBJ) to acquire German sanitary products maker Grohe for 3.06 billion euros ($4.13 billion). State-owned Development Bank of Japan and Lixil Group Corp formed a 50:50 joint venture to purchase a 87.5 percent stake in the German firm. Grohe was previously owned by TPG Capital and the private equity unit of Credit Suisse Group AG (NYSE:CS), reports Nathan Layne and Christiaan Hetzner of Reuters. LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) expects to close the deal in the first quarter of 2014.

Lixil Group

Lixil focused on overseas markets

It was the second major overseas acquisition by a Japanese firm, and the biggest ever investment by a Japanese company in Germany. Earlier this month, Japan’s Suntory Beverage & Food Ltd (TYO:2587) bought the popular Lucozade and Ribena brands from GlaxoSmithKline plc (NYSE:GSK) (LON:GSK) for $2.2 billion. Boosting its overseas sales has become crucial for LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY). Japan’s housing market is shrinking amid an aging population. Analysts expect the Japanese housing market to contract further as the overall population declines.

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LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) aims to generate at least 33 percent of its revenues from overseas markets in the mid-term. Currently, less than 15 percent of its total sales comes from outside Japan. LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) also plans to double its revenues from 1.5 trillion yen last year to 3 trillion yen in the mid-term.

Grohe makes bathroom fittings and has about 9,000 employees globally. Before the deal, the company’s private equity owners were evaluating the options to sell it or list it in the stock market. TPG Capital and DLJ Merchant Banking Partners, the private equity arm of Credit Suisse Group AG (NYSE:CS), purchased Grohe for 1.5 billion euros in 2004. Last year, the company posted 1.4 billion euros in revenues and 273 million euros in earnings.

Lixil to take a break from acquisition now

The acquisition of Grohe will give LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) a strong footprint in Europe and Asia. Grohe is the majority owner of Chinese sanitary products maker Joyou, which has a strong presence in China, Thailand and Indonesia. LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) CEO Yoshiaki Fujimori said his company will finance the deal through a mix of cash and borrowing. The Japanese company has arranged about $2 billion in loans from three Japanese banks.

LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) has been on an acquisition spree. Last month, the company acquired American plumbing and toilet fixtures maker American Standard Brands for $342 million. In 2011, it purchased Permasteelisa of Italy for 573 million euros. Yoshiaki Fujimori said LIXIL Group Corp (TYO:5938) (OTCMKTS:JSGRY) will take a break from acquisition now to focus on integrating its recent purchases.

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