A stark warning has been issued by a board member at Swiss elevator manufacturer Schindler. Alfred Schindler said in an interview with Reuters that any potential move to merge German industrial giant thyssenkrupp's lift division with its competitor Kone would trigger an instant and all-out antitrust battle in the courts in an attempt to at least stall the deal.
thyssenkrupp elevator test tower
The thyssenkrupp Test Tower in Rottweil, Germany. Photo: thyssenkrupp Elevator.
Mr Schindler's remarks came the day after the deadline for bids for thyssenkrupp Elevator, which saw Finland's Kone and three private equity consortia wresting for control of the business, in a deal that sources say could be worth as much as €17-billion.
A merger between thyssenkrupp and Kone would overnight create the world's biggest elevator manufacturer, shooting ahead of current market leader Otis, a subsidiary of United Technologies, and Schindler, currently in second place.
“We would probably file lawsuits in Europe, the United States, Canada, China and possibly Australia. These cases would take at least three to four years,” said Schindler, who is now chairman emeritus of the company he ran for 26 years.
“You can safely assume that neither Otis nor Schindler will simply accept being driven out,” he added.
Otis and thyssenkrupp so far not commented and a spokesperson from Kone said that thge company was of the belief that there was room for consolidation in the sector.
Shares in Kone fell as much as 3.9% following Schindler’s comments while thyssenkrupp shares rose slightly.
thyssenkrupp, once a powerful symbol of German industrial strength, is now struggling with debts of around €12.4-billion, as well as pension liabilities, after a series of ill-fated investments. The company needs to raise money from its prized lifts division in order to restructure.
Based on bids alone, Kone and a consortium of Blackstone, Carlyle and the Canada Pension Plan Investment Board look best placed to reach the final round, although no decision has been made.
Kone has made a non-binding bid of €17-billion while the consortium has offered about €16-billion.
A consortium comprising Advent, Cinven and the Abu Dhabi Investment Authority and an alliance between Canada’s Brookfield and Singapore’s Temasek are also in the running, sources have said.
The situation for thyssenkrupp looks to be that a sale to Kone would raise the most money for the beleaguered industrial conglomerate, but doing so could trigger legal investigations in all territories where the newly merged company would be a major player, including Europe and the US.
A report by DICE Consult said: "Such a hypothetical takeover would ... have considerable effects on the structure of the relevant markets and most likely lead to significant negative impacts on effective competition in many markets."
Kone has drawn up plans to hand thyssenkrupp’s European assets to private equity firm CVC but the European Commission generally prefers industrial buyers that can compete better with the firm offloading assets.
Powerful labour unions, who control half of thyssenkrupp’s supervisory board, oppose any breakup of the business as well as antitrust reviews.
“What Thyssenkrupp needs now is high transaction certainty for the remaining group, not hanging in the balance for 1 to 2 years,” said Knut Giesler of IG Metall, Germany’s largest union, and vice chairman of thyssenkrupp Elevator’s supervisory board.
Currently, Kone is the world's third largest elevator maker, with thyssenkrupp and Hitachi following up.
Schindler was the Swiss firm’s CEO from 1985 until 2011 and his views carry significant weight as the Schindler and Bonnard families, and related parties, hold 71.1% of the voting rights.
Schindler, who during his tenure oversaw the transformation of the company into a global player, said it would also intensify its operational efforts to fight a combined Kone and thyssenkrupp.
“There will be a technology war. It is already ongoing but it will intensify massively,” he said, without going into further detail.
“Surprise lies at the heart of any defence strategy. A strategy that you lay out in advance would go against any rule of warfare.”
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