Daikin Said to Be in Talks to Acquire Goodman Global

AM EST By Masatsugu Horie and Jason Kelly

(Adds closing share price in 10th paragraph.)

Dec. 7 (Bloomberg) -- Daikin Industries Ltd., Japan’s largest air-conditioner maker, is in talks to buy Houston-based Goodman Global Inc. from Hellman & Friedman LLC to expand in the U.S. market, a person familiar with the matter said.

The U.S. buyout fund is negotiating a revised proposal after rejecting an offer of about 300 billion yen ($3.6 billion) this year from Osaka-based Daikin, said the person, who asked not to be identified because the talks are private. Discussions with Goodman could still fall apart and an agreement may not be made until next year, the person said.

A deal may result in Japan’s biggest foreign buyout since at least 2008 and help Daikin overtake United Technology Corp.’s Carrier unit as the world’s largest air-conditioner maker in an industry that’s grown 30 percent in the last five years. Hellman & Friedman acquired Goodman two years ago for $2.6 billion.

“The amount is quite big for them,” said Hidehiko Hoshino, an analyst at UBS Securities Japan Ltd. in Tokyo who has a “neutral” rating on Daikin. “If you look at their finances or balance sheet, and if the amount of about $3 billion to $4 billion is correct, it’s not easy for them to do.”

While the U.S. is the biggest market for air conditioners, Daikin should aim to increase sales in China and developing countries where demand is increasing, Hoshino said.

Brendan McManus, a spokesman for Hellman & Friedman, declined to comment, as did Motoshi Hosomi, an Osaka-based spokesman for Daikin. A telephone message and e-mail left for Goodman Chief Financial Officer Lawrence Blackburn after regular business hours weren’t immediately returned.

“We want Daikin to be number one both in name and reality,” Chairman Noriyuki Inoue told reporters in Osaka on Sept. 28. “If you want to be number one in the world you’ve got to be a major player in the U.S.”

Doubled Sales

The 75-year-old chairman made Daikin the world’s second- largest air-conditioner maker after he led the purchase of Malaysia’s OYL Industries Bhd. in 2006. Sales at the company have more than doubled to 1.02 trillion yen since Inoue became chairman in 1995.

A purchase would push Daikin’s sales above those of market leader Carrier, in an industry worth $65 billion last year, according to estimates at BSRIA, a U.K.-based research firm. Connecticut-based Carrier, through its tie-up with Toshiba Corp., held 11 percent of the market last year, according to BSRIA.

Share Price

Daikin shares, which have dropped 18 percent this year, fell 3.8 percent to 2,993 yen as of the close on the Tokyo Stock Exchange, the biggest decline since Aug. 31. Japan’s benchmark Topix index lost 0.3 percent.

Goodman, which last year posted profit of $101.8 million last year, is the second-largest U.S. maker of residential air- conditioning products, according to its website. Daikin had net income of 19.4 billion yen in the 12 months ended March.

Founded in 1924, Daikin began as an aircraft radiator tubes and fluorine refrigerants manufacturer, entering the air conditioning business in 1951, according to the company’s website.

The deal may be the biggest acquisition of a foreign rival since Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, bought San Francisco-based UnionBanCal Corp. for $3.61 billion in August 2008, according to data compiled by Bloomberg.

--With assistance from Adam Le in Osaka and Ed Dufner in Dallas. Editors: Drew Gibson, Young-Sam Cho.

To contact the reporters on this story: Masatsugu Horie in Osaka at mhorie3@bloomberg.net; Jason Kelly in New York at Jkelly14@bloomberg.net.

To contact the editor responsible for this story: Drew Gibson in Osaka at dgibson2@bloomberg.net.

View the original article here