Daikin Said in Talks to Buy Goodman Global After $3.6 Billion Bid Rejected

Daikin Industries Ltd., Japan’s largest air-conditioner maker, is in talks to buy Goodman Global Inc. from buyout firm Hellman & Friedman LLC to expand in the U.S., a person familiar with the matter said.

Hellman & Friedman is negotiating a revised proposal after rejecting a bid of about 300 billion yen ($3.6 billion) from Daikin, said the person, who asked for anonymity because the details are private. Discussions could still fall apart, and an agreement may not come until 2011, the person said.

“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.”

Acquiring Houston-based Goodman would propel Daikin past United Technologies Corp.’s Carrier unit to the top spot in the global air-conditioning industry by revenue. San Francisco-based Hellman & Friedman bought Goodman two years ago for $2.7 billion.

Brendan McManus, a spokesman for Hellman & Friedman, declined to comment. A telephone message left for Goodman Chief Financial Officer Lawrence Blackburn today wasn’t immediately returned. Motoshi Hosomi, a spokesman for Osaka-based Daikin, also declined to comment.

‘Name and Reality’

“We want Daikin to be No. 1 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.”

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

Combined revenue for Daikin and Goodman would exceed those of Carrier, in an industry worth $65 billion in 2009, according to estimates at BSRIA, a U.K.-based research firm. Farmington, Connecticut-based Carrier, through its tie-up with Toshiba Corp., held 11 percent of the market last year, according to BSRIA.

Hoshino, the UBS analyst, said that 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.

Shares Decline

Daikin fell 3.8 percent to 2,993 yen as of the close on the Tokyo Stock Exchange, the biggest decline since Aug. 31. The shares have declined 18 percent this year, compared with a 3.1 percent drop for Japan’s benchmark Topix index.

Hellman & Friedman announced or completed seven deals this year valued at $6.49 billion, based on data compiled by Bloomberg. The firm was part of a group that sold Intergraph Corp., the business and government software provider based in Huntsville, Alabama, to Stockholm-based Hexagon AB, the world’s biggest maker of measuring instruments, for $2.13 billion.

The buyout firm this year also acquired Associated Materials LLC, the Cuyahoga Falls, Ohio-based maker of exterior residential building products, for $1.3 billion. Both deals were completed in October.

Goodman, which 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 2008, according to data compiled by Bloomberg.

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.

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