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.
Shares of Lixil, which bought bathroom-fixture maker American Standard Brands this year, fell the most in almost two years in Tokyo trading. TPG Capital and Credit Suisse Group AG (CSGN), 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. (JY8)
“The addition of Grohe would be complementary from a global expansion and product line development point of view,” said Mark Brown, an analyst at JI Asia Research Ltd. “What we don’t know is how big the cost will be, and how they will fund it?”
Lixil is a subsidiary of Lixil Group Corp. (5938) that also sells construction materials. The company said last month it’s considering overseas alliances and acquisitions to more than double sales to 1 trillion yen ($10 billion).
Shares of Lixil Group fell as much as 5.8 percent, the most since November 2011, to 2,054 yen. The stock traded at 2,067 yen as of 11:09 a.m. in Tokyo.
Grohe spokeswoman Ulrike Heuser-Greipl said the exit process including a potential sale or IPO is still ongoing and declined further comment. Miyuki Otomo, a spokeswoman for Lixil, based in Tokyo, declined to comment on Grohe when contacted by Bloomberg News today. Representatives for TPG, Geberit and Credit Suisse declined to comment.
Japanese companies are targeting overseas expansion as the nation’s population shrinks. SoftBank Corp. acquired control of Sprint Nextel Corp., the third-largest U.S. wireless carrier, in July. Suntory Beverage & Food Ltd. reached a deal to buy the Lucozade and Ribena drink brands from GlaxoSmithKline Plc for 1.35 billion pounds ($2.2 billion) this month.
Lixil Group had 285 billion yen of long-term borrowings outstanding at the end of March, according to data compiled by Bloomberg. The company is rated a fifth-highest A+ by Japan’s Rating & Investment Inc. and had 40 billion yen in bonds outstanding, according to data compiled by Bloomberg.
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 (GEBN), the people said.
Wall Street Journal Deutschland reported the advanced talks with Lixil yesterday.
To contact the reporter on this story: Aaron Kirchfeld in London at email@example.com