Billionaire-Backed Danfoss Seeks Takeovers as Cash Pile Grows

  • CEO says Danfoss can do bigger purchases with bond program
  • Company last year made its largest ever acquisition with Vacon

Danfoss A/S, which is controlled by the Danish billionaire family of Joergen Mads Clausen, is ready for more more takeovers one year after completing its biggest ever acquisition.

“We have a good cash flow and we’re going to use that to grow and to strengthen our position,” Chief Executive Officer Niels B. Christiansen said in an interview in Paris.

Danfoss last year bought Finland’s Vacon Oyj for 1.04 billion euros ($1.14 billion) to become the world’s No. 2 maker of air conditioner drives after ABB Ltd. To help finance that takeover, the Danish company issued its first ever bond.

With the debt funding program, and cash flow rising 8 percent last quarter, financing conditions “are pretty good,” Christiansen said. “That means we can do bigger things,” the 49-year-old CEO said.

The yield on Danfoss’s 1.375 percent 500 million-euro ($550 million) bond due 2022 rose 3 basis points Wednesday after the CEO’s comments. The bond yielded 1.35 percent on Thursday at 9:17 a.m. in Copenhagen compared with a 2015 low of 0.83 percent in April.

Danfoss, based in the Danish city of Nordborg, also makes hydraulic controlling systems for heavy machinery and AC compressors. The company employs about 24,000 people and had sales of 9.48 billion kroner in the third quarter and net income of 778 million kroner. Net debt was 10.4 billion kroner at the end of September and cash flow rose to 2.99 billion kroner for the first nine months of the year.

Christiansen didn’t provide specifics on the kind of takeover he might be considering. There are potential targets in China, “but it’s not easy” to buy a Chinese company, he said.

To increase its scale in China, Danfoss is also focusing on organic growth by tailoring products specifically for that market, he said.

“If you don’t have a market share in China that’s significant, it gets dangerous long term,” he said. China is Danfoss’s biggest market after the U.S.

“I think it will stay like that” after Chinese growth slowed, the CEO said.

The Clausen family has in the past considered an initial public offering of Danfoss, but that’s no longer something the owners are considering, Christiansen said.

“The way we are performing right now, the value-creation we’re doing for the family is too for high for them to want to” list the company, he said.

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