Japan’s Lixil, which agreed to buy bathroom-fixture makers American Standard Brands and Grohe Group last year, is studying another overseas acquisition to boost revenue from emerging markets.

January 12, 2014 Leave a comment

Lixil mulls another overseas takeover

BY SHIGERU SATO AND EMI URABE

BLOOMBERG

JAN 8, 2014

p6-lixil-a-20140109-870x619

Lixil Group Corp., which agreed to buy bathroom-fixture makers American Standard Brands and Grohe Group last year, is studying another overseas acquisition to boost revenue from emerging markets.

The planned deal will help Tokyo-based Lixil achieve its target of increasing sales from emerging markets to more than 30 percent of its revenue, from about 20 percent now, Chief Executive Officer Yoshiaki Fujimori said in an interview Monday. The company could spend tens of billions of yen on its next takeover, Fujimori added.Since Fujimori joined the company in June 2011, Lixil has spent $5.3 billion buying companies in the U.S. and Europe to counter slowing demand at home amid the shrinking population.

It is now seeking acquisitions that can help increase revenue from Southeast Asia, South America and Africa, he said.

“2014 will be the year for Lixil to start full-fledged efforts to globalize itself with the brands we have created and gained through acquisitions,” said Fujimori, who formerly worked for General Electric Co. “We’ll seek a two-digit percentage growth in revenue by expanding sales from emerging markets.”

Fujimori declined to identify any targets, saying only that a deal would be “water-related.” Besides bathroom fixtures, Lixil also manufactures building materials for housing as well as doors and windows.

To keep pace with its global shift, Lixil plans to reshape management for some of its departments, including human resources, marketing and business development, Fujimori said. The company will hire an American lawyer fluent in Japanese, Chinese and English to head its legal department starting in April, he said, without identifying the person.

In September, Lixil and Development Bank of Japan agreed to acquire an 87.5 percent stake in Germany’s Grohe, a maker of high-end faucets and other bathroom fixtures, for €2.94 billion ($4 billion). The deal is expected to close by June 30.

It earlier bought the maker of American Standard toilets for $542 million and has also purchased Permasteelisa SpA, which made walls for the Guggenheim Museum and Sydney Opera House.

Lixil’s revenue for the year that ended in March 2013 rose 11 percent to ¥1.44 trillion, while net income jumped more than elevenfold to ¥21.3 billion. It forecasts profit of ¥41 billion for this business year, on revenue of ¥1.6 trillion, Lixil said in its Nov. 5 earnings statement.

Fujimori said he almost pulled out of early negotiations to buy Grohe after disagreeing on price and will always keep the option of walking away from an acquisition.

“You don’t put yourself in a position that you must make a deal no matter what,” he said.

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment