Chinese home appliance manufacturer Midea Group is betting big on high tech manufacturing.
On Wednesday, Midea made a whopping $5 billion USD bid for a more than 30% stake in German robotics company Kuka AG. Kuka specializes in industrial automation, where robots autonomously complete industrial tasks, such as welding, assembling components, and load-bearing.
Acquiring a more than 30% stake in Kuka means Midea will have to make an offer for all of Kuka’s outstanding shares. Midea’s bid is an all-cash proposal at €115.00 per share (about $130 USD) for all issued shares of Kuka. If the Chinese company’s bid is accepted, Kuka will remain independent and listed in Germany, according to Midea’s press release.
Though a potential acquisition of Kuka’s technology by a Chinese company worries regulators, Kuka investors celebrated Midea’s bid, sending shares upwards by around 25%.
Midea’s bid for Kuka comes in the context of rising labor costs and the company’s desire to move towards high tech manufacturing. According to a 2015 report by McKinsey, China’s working age population is expected to shrink by 16% by 2050, as the country is seeing increasing wage competition from its southern neighbors, such as Vietnam and Indonesia.
Investing in smart manufacturing will be long-term play for Midea, which currently has more than 100,000 employees worldwide. In addition, the company wants to develop smart home devices as part of an initiative called “Smart²”, launched in 2015.
“The investment fits perfectly into Midea’s”Smart²” strategy, which aims to upgrade our manufacturing competencies and develop smart home devices,” stated Paul Fang, the CEO and Chairman of Midea, the company’s press release.
Part of Midea’s Smart² strategy is about developing smart home devices using robotics technology. According to Midea, the company aims to increase its overall sales to over 25 billion euros (about 28 billion USD) over the next few years. The company hopes to make smart devices and service robotics a significant part of those sales.
Image credit: KUKA Aktiengesellschaft