KPS Capital to Acquire Innomotics for €3.5 Billion

MAY 16, 2024

Paul, Weiss is advising KPS Capital Partners, LP in its acquisition, via a newly formed affiliate, of Innomotics GmbH from technology company Siemens AG for an enterprise value of €3.5 billion. Headquartered in Nuremberg, Germany, Innomotics is a leading global supplier of mission-critical electric motor and large drive systems, employing approximately 15,000 people and operating 16 factories across the EMEA, Americas and Asia-Pacific regions. The transaction is expected to close in the last quarter of 2024 or first quarter of 2025, subject to customary closing conditions and approvals.

On April 7, the world's first medium-voltage drives of Innomotics, a brand of Siemens, officially rolled off the production line at its (Shanghai) Electric Transmission Equipment Co., Ltd. This is the brand’s first medium-voltage frequency converter order, consisting of two GH180 frequency converters, which will be used in a test bench environment for the pump industry. This customer has a long-term cooperative relationship with Siemens.

     In early March this year, Siemens (Shanghai) Electrical Transmission Equipment Co., Ltd.-SEDS officially changed its name to Inmonda (Shanghai) Electrical Transmission Equipment Co., Ltd.-SIED, and held a grand unveiling ceremony.

     As a wholly-owned subsidiary of Siemens, Inmonda operates independently, with operations in 50 countries around the world and 16 factories. It has approximately 15,000 employees worldwide and revenue of approximately 3 billion euros.

     China is Inmonda's main global R&D and manufacturing base. Currently, the brand has 5 affiliated companies (including 1 regional headquarters and 4 factories), 13 branches and 4 R&D centers in China, with a total of 3,500 employees. In November last year, Inmonda's China regional headquarters landed in Shanghai.

     Siemens intends to sell motor and large transmission systems business

     At the end of November last year, Siemens mentioned in its 2023 financial report (October 1, 2022 to September 30, 2023) that "positive financial performance and healthy reserve orders highlight Inmonda as an innovative motor and large transmission company." The advantageous position of the system supplier. Therefore, the time has come for Inmonda to take the next step towards independent operation.”

     In view of this, Siemens plans to start preparations for the public listing of the Inmonda brand. At the same time, Siemens will also evaluate quotes from third parties. In other words, in addition to being publicly listed, the parent company of Inmonda is also considering selling. It is rumored that Nidec, a well-known Japanese motor manufacturer (Nidec, the group will be unified under the name from April 1), has participated in the acquisition of this business.

     The business for sale is strong

     On July 1, 2023, Siemens integrated its related businesses in the fields of motors, frequency converters and electric spindles with more than 150 years of history to establish INNOMOTICS GmbH, INNOMOTICS Co., Ltd. (Germany). The operating headquarters is located in Nuremberg, Germany. This business The sector includes the related businesses of the previous Siemens Large Drive Applications Division, Siemens Digital Industries Group, as well as Sykatec and Weiss Spindeltechnologie, which are legally independently operated by Siemens.

     Data shows that as of November 2023, market research and external evaluation, Inmonda ranks first in the global IEC market in the field of low-voltage motors, ranks first in the high-voltage motor and medium-voltage drive markets, and ranks first in solutions Second in the world.

With the sale imminent, Siemens’ brands have made another big move

Picture source: intercepted by Yinmeng Daguan’s WeChat account

     Well-known Japanese motor manufacturers have obvious acquisition intentions

     According to Bloomberg, Nidec and private equity firm KPS Capital Partners are competing to acquire Siemens Inmunda's business. It is reported that the assets to be traded will generate annual profits before interest, taxes, depreciation and amortization of 300 million to 400 million euros, with a revenue scale of approximately US$3.28 billion. According to reports, Nidec and KPS have been invited to join the second round of bidding teams.

      Nidec mainly provides the market with various motor and motor products ranging from precision small motors to ultra-large motors. The group's vision is to become "a powerful comprehensive motor and motor manufacturer in the world." In July 1973, current chairman Nagamori Shigenobu registered the company in Saikyo District, Kyoto City with a capital of 20 million yen. In August, the company began manufacturing and selling precision small AC motors. In the 39 years from 1984 to 2023, Nidec initiated 73 mergers and acquisitions. Today, the company is a conglomerate with more than 300 branches around the world.

     After entering the new century, Nidec's management realized that the HDD motor business accounted for a high proportion of overall sales and profits, and the top three customers (sales) all used their own motor products. In view of this, Nidec began to promote the transformation of its business portfolio through acquisitions, such as Valeo (France), Solar Motor Company (Italy), Emerson's motor and controller business unit (United States), etc.

     Later, the transformation of Nidec's business portfolio was relatively smooth. Because the company has made a series of acquisitions, its general motors (vehicle + home appliances and industrial motors) accounted for 20% of the total sales in 2008 and 2009, and increased to 20% in 2011. Up to 26%.

Nidec (formerly Nidec) business sales composition ratio by year

With the sale imminent, Siemens’ brands have made another big move

Source: Nidec official website

       Acquisitions in the industrial sector continue to strengthen the strength of giants

       In 2016, Nidec acquired Ansaldo Industrial Systems (ASI), a large Italian motor manufacturer, which gave it the ability to produce motors with higher output power and made it one of the important players in the world's industrial motor market. . At that time, the maximum output power of the large motors Nidec could provide was 3,700kW. Although it had certain advantages, there was still a big gap compared with the ultra-large motors that ASI could provide with a maximum output power of 35,000kW.

     Later, in March 2017, Nidec completed the acquisition of the global business of Control Techniques. Control Techniques was established in Newtown, Wales, UK in 1973 and specializes in low-voltage AC frequency conversion and DC drive products. In July of the same year, Control Techniques joined NIDEC EUROPE B.V. After Control Techniques joined, it became Nidec's most important motion control product. In the field of industrial applications, Control Techniques drive products can complement Nidec's original motor business.

     In addition to increasing the competitiveness of the large motor business through a series of acquisitions and other actions, Nidec has already laid out the motor reducer business through acquisitions very early on.

     In February 1995, Nidec-Shimpo, then known as Nidec-Shimpo, acquired Nidec-Shimpo. Founded in April 1952, Xinbao's strength cannot be underestimated. It is Japan's first "continuously variable transmission" manufacturer.

     Information shows that in June 2015, Nidec Shinpo, then known as Nidec, launched the precision control reducer "FLEXWAVE" for robots and machine tools. Later, this reducer product was used in robots, semiconductor manufacturing equipment, etc. As of October 2022, more than 1 million units have been shipped.

     In addition, in order to further expand the demand for automation equipment such as new energy vehicle processing, Nidec began to get involved in the machine tool business in 2021, such as acquiring the machine tool business of Mitsubishi Heavy Industries in 2021, and acquiring the Japanese machine tool manufacturer OKK in 2022. At the end of the same year, It also announced the acquisition of Italian machine tool company PAMA. The acquisition of PAMA is Nidec’s first overseas merger and acquisition in the machine tool field.

     ABB successfully acquires Siemens low-voltage NEMA motor business

   In addition to Inmonda, its motor and large transmission system business that is seeking to be independently listed or sold, Siemens has recently sold its low-voltage NEMA motor business to ABB, a major industrial automation company.

     According to ABB's announcement, the transaction was first announced in August 2022. In May of the following year, it announced that it had completed the acquisition of Siemens' low-voltage NEMA motor business. According to disclosures, the transaction business employs approximately 600 people and has revenue of approximately US$63 million (2021).

With the sale imminent, Siemens’ brands have made another big move

      For this transaction, ABB said that the acquisition is part of the profitable growth strategy of the motion control business area. It strengthens ABB's position as a leading manufacturer of industrial NEMA motors. NEMA motors are critical components in equipment running in applications such as food and beverage, oil and gas, and more. The size of the global NEMA motor industry is approximately US$2.7 billion,

    Just a few days before ABB completed the acquisition of Siemens' low-voltage NEMA motor business, WEG, one of the world's top three low-voltage AC motor suppliers, announced the acquisition of Gefran's motion control business. It was rumored that the bid was only for the transaction target business. Receive half of the total amount. Later, in late September, WEG announced the acquisition of Regal Rexnord’s industrial motor and generator business. This acquisition included most of the latter’s industrial systems division, namely the Marathon, Cemp and Rotor brands.

    Due to the continuous mergers and acquisitions between industries in the field of low-voltage motors, the market share gap between WEG and the leader ABB continues to narrow. As early as 2011, ABB completed the acquisition of Baldor Electric, the largest motor supplier in North America. With this deal ABB becomes the market leader in low voltage industrial motors