Japan’s Lixil Considers Buying Germany’s Grohe; Deal Would Be Largest Japanese Acquisition of a German Company

Updated September 23, 2013, 11:36 a.m. ET

Japan’s Lixil Considers Buying Germany’s Grohe

Deal Would Be Largest Japanese Acquisition of a German Company

EYK HENNING

Japanese housing-equipment maker Lixil Group Corp. 5938.TO -5.04% is in advanced talks to buy Germany’s Grohe, several people familiar with the deal said, a transaction that could value the bathroom-fittings maker slightly above €3 billion ($4 billion). Grohe’s owners, financial investors TPG and Credit Suisse‘s CSGN.VX -1.14%private-equity arm, are seeking to sell the company, but have been conducting a dual-track process in which they simultaneously prepare an initial public offering of stock in case a sale falls through. The two investors have jointly owned the Düsseldorf-based maker of faucets and showers for almost a decade.The deal would be the largest Japanese acquisition of a German company, according to Dealogic, citing data back to 1995. Until now, the highest price paid in a Japanese purchase of a German company was TDK Corp.’s 6762.TO -0.52% acquisition of Epcos for $1.84 billion in 2008.

Lixil wasn’t immediately available for comment. The company has been expanding globally, most recently acquiring ASD Americas Holding Corp., the parent company of American Standard brands, for $342 million plus debt.

While an IPO this fall remains a possibility, talks with Lixil could be concluded as early as this week, two people familiar with the matter said.

Other suitors also could come back to the table, including Geberit AGGEBN.VX +0.21% of Switzerland. Geberit put an offer in play earlier this month and could return to the negotiations should talks with Lixil fail, a person familiar with the matter said.

Founded in 1936 by Friedrich Grohe, the company employs about 9,000 people and last year recorded €273 million in adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, on revenue of €1.4 billion. The Ebitda margin of about 19% falls short of Geberit’s 25%, which is why suitors weren’t willing to accept a €4 billion price tag that Grohe’s owners had initially hoped for and that would have valued it in line with its Swiss peer.

TPG and Credit Suisse bought Grohe for €1.5 billion in 2004, an acquisition that sparked a controversy over private equity in Germany. Franz Muntefering, then chairman of the Social Democratic Party of Germany, in 2005 made headlines by branding private-equity houses “locusts,” which buy and overhaul companies for profit, often shedding jobs in the process.

The deal is now viewed by many as a success. Under Chief Executive David Haines, who took the helm at Grohe in 2004 after top positions at Vodafone GroupVOD.LN +0.29% PLC and Coca-Cola Inc., KO -1.95% the company has improved its profitability and entered growth markets. Grohe, for example, has built up a 72% stake in China’s No. 1 maker of faucets by market share, Joyou 002242.SZ +1.33% AG.

Lixil Said to Be in Talks to Buy Grohe for 3 Bln Euro

Lixil Corp., a Japanese toilet maker, is in advanced talks to buy German bathroom-fixtures company Grohe Group for more than 3 billion euros ($4 billion), according to people with knowledge of the matter.

The companies may announce an agreement as early as this week, said the people, asking not to be identified because the negotiations are private. An initial public offering remains an option because no final deal has been reached, they said.

Lixil, which also sells construction materials and bought bathroom-fixture maker American Standard Brands this year, said last month it’s considering overseas alliances and acquisitions to more than double sales to 1 trillion yen ($10 billion). TPG Capital and Credit Suisse Group AG, which bought Grohe in 2004 for a reported $1.84 billion from BC Partners Ltd., helped expand the company’s reach into Asia in 2011 when they bought control of China’s Joyou AG.

Private-equity firms are now tapping low borrowing costs and rising equity markets to exit investments made before the financial crisis in 2007.

TPG, the private-equity firm run by David Bonderman and James Coulter, and Credit Suisse have been exploring a dual-track sale and listing process since April, people familiar with the preparations said at the time. Grohe, which is based in Dusseldorf and calls itself Europe’s largest provider of sanitary fittings, had also drawn interest from companies including Swiss competitor Geberit AG, the people said.

Grohe spokeswoman Ulrike Heuser-Greipl said the exit process including a potential sale or IPO is still ongoing and declined further comment. Lixil, based in Tokyo, couldn’t be immediately reached for comment outside of regular business hours. Representatives for TPG, Geberit and Credit Suisse declined to comment.

Wall Street Journal Deutschland reported the advanced talks with Lixil earlier today.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net