Daikin buys Goodman for $3.7 billion

OSAKA, JAPAN and HOUSTON — Global air conditioning giant Daikin Industries Ltd. announced August 29 that it has signed a definitive agreement to acquire Goodman Global Group Inc. from affiliates of Hellman & Friedman LLC for $3.7 billion.

The move would bring together some of the strongest players in the global HVAC marketplace. The two companies said in prepared statements that by combining the global, environmental, technological and commercial expertise of the Daikin Group and the logistical, residential and light commercial expertise of Goodman, an opportunity is created to achieve a level of success in the HVAC marketplace not possible as individual companies.

Daikin, which also owns McQuay International, Minneapolis, and American Air Filter, Louisville, Ky., recorded 2011 sales of more than $15.5 billion. It is the world’s largest HVAC manufacturer. The company employs roughly 44,000 people, has manufacturing operations in 18 countries, and a sales presence in more than 90 countries. Daikin AC Americas is headquartered in Carrollton, Texas.

Daikin sells ductless split air conditioners and air-to-air and air-to-water heat pumps with high SEERs and COPs. Its highest efficiency product sold in the U.S. is the inverter-driven Daikin Altherma.

Goodman, which sells unitary equipment, mostly in the American market, under the Goodman and Amana brand names, had 2011 sales of $2.1 billion. It also owns Quietflex flexible ductwork solutions that are manufactured in Texas, Florida, Arizona and Pennsylvania. Goodman has 4,500 employees, mostly in Texas and Tennessee. Goodman sells its products through a distribution network with more than 900 total distribution points comprised of 192 company-operated distribution centers and independent distributors.

The acquisition gives Daikin a foothold in the world’s largest HVAC market with ducted unitary air conditioning equipment and furnaces, product lines it did not have.

Daikin Chairman & CEO Noriyuki Inoue, Goodman President & CEO David L. Swift and Hellman & Friedman Chairman Brian M. Powers conducted the signing ceremony in Osaka, Japan. The transaction, pending regulatory approval, is expected to close in the fourth quarter of 2012.

“Goodman is the best North American partner for Daikin as we aim to reinforce our position as the leading global HVAC manufacturer,” Inoue said. “Goodman’s market-leading ducted product offering and extensive distribution network in the largest HVAC market in the world is complementary to Daikin’s existing products and distribution channels.”

Inoue also said that Daikin would capitalize on Goodman’s lean manufacturing know-how and supply chain management expertise to improve the earning power of the entire Daikin Group. That expertise will allow Daikin to penetrate the high-volume “value” segment in cost-sensitive global markets.

Goodman, in turn, will incorporate some of Daikin’s energy saving and power management technologies.

Daikin said Goodman will remain independent and that it does not plan to merge Goodman into any other existing organizations or divest any of its businesses “in the foreseeable future.”

Goodman’s Swift stated that, “The combination of the Daikin Group and Goodman is the next step in becoming the definitive leader in the global HVAC marketplace. I am enthusiastic about our companies coming together to further satisfy the needs of our customers now and in the future.”

Swift also noted that, “Because of the different, complementary products and markets that our separate organizations serve, we do not expect any immediate organizational changes.”

Erik Ragatz, managing director at Hellman & Friedman LLC and chairman of the board of directors of Goodman Global Group Inc. stated, “The combination is a terrific outcome for both the Goodman and Daikin organizations and sets the stage for continued success for the new organization. Bringing together Goodman’s world class management team and execution capabilities with Daikin’s industry leading technology, equipment, and support programs create a global leader with unrivaled capabilities.”

Daikin plans to finance the acquisition with a combination of its own money, funds from an initiative of the Japan Ministry of Finance, straight bond issuances, and bank loans. Daikin does not intend to issue more stock.