By Natascha Divac
FRANKFURT -- German companies are accelerating their expansion
in the U.S., undaunted by President-elect Donald Trump's threats to
limit international trade and uncertainty surrounding his future
stance on foreign takeovers.
For companies ranging from giants like Bayer AG and Siemens AG
to smaller players, low interest rates, rebounding consumer markets
and U.S. reindustrialization are alluring enough to offset any
trepidation.
German companies last year announced 64 U.S. acquisitions,
valued at $88.5 billion, according to data provider Dealogic.
Bayer's pending $57 billion deal for Monsanto Co. accounted for the
lion's share of the record volume, but an array of smaller deals
spans industries from technology to consumer products to health
care to industrials.
Although Mr. Trump's stance on cross-boarder takeovers remains
unclear, analysts believe he wouldn't object to deals that boost
traditional industries and keep jobs in the U.S. Mr. Trump, in an
interview last week, said that his efforts to boost U.S. investment
and keep jobs in the country are paying off.
Bayer and Monsanto met with the president-elect last week to
make a case for the German firm's takeover amid concerns over the
impact on U.S. agriculture, with Bayer pledging to add "several
thousand" new high-tech positions in the U.S. after the
acquisition, while boosting research investments.
In November, Siemens announced the takeover of
industrial-software provider Mentor Graphics Corp. for about $4
billion, intensifying its rivalry with General Electric Co. Months
earlier Siemens acquired U.S.-based simulation-software provider
CD-adapco in a deal valued at roughly $1 billion.
Chemical company Lanxess AG, spun off by Bayer in 2005,
surprised investors in September with the $2.7 billion acquisition
of Chemtura Corp., a Philadelphia-based maker of additives for
lubricants and flame retardants, increasing competition with
rivals, including Berkshire Hathaway Inc.'s Lubrizol.
For Lanxess Chief Executive Matthias Zachert, Mr. Trump's
victory and his criticism of foreign trade are "even more reason"
to invest in the U.S.
If a Trump administration were to raise trade barriers, "we
would of course have a better and more expanded production base in
the U.S." than rivals only exporting to the country, he said.
Germans' top takeover targets in the past year have been firms
in technology, materials and industrial goods. The vast U.S.
consumer market is also an attractive target.
Consumer-products company Henkel KGaA in June announced the
acquisition of Sun Products, the maker of All and Wisk laundry
detergents, for about $3.6 billion, pushing hard to take on Procter
& Gamble Co. in its home market. Analysts estimated that, with
Sun, Henkel would have about 21% of the U.S. liquid laundry market,
leapfrogging Church & Dwight but still trailing P&G's
dominant 55% share.
Nike Inc., the world's top sportswear maker, faces increased
competition at home from Germany's Adidas AG, which after years of
sliding sales is now enjoying strong momentum in North America.
Adidas CEO Kasper Rorsted said recently he expected the U.S. market
to grow "over-proportionally" for the company compared with other
regions.
German discounter Aldi Sued said it plans "an aggressive
coast-to-coast expansion" in the U.S., boosted by $3 billion in
investments. The bargain retailer has been steadily expanding its
U.S. footprint over the past 40 years. Now, it sees "a lot more
opportunity," Aldi Sued said, as it pushes into wealthier areas and
appeals to more upscale tastes. Aldi aims by 2018 to increase its
network to 2,000 stores from about 1,600 to meet "an increased
demand for Aldi across the U.S.," it said.
Aldi's cut-price German rival Lidl Stiftung & Co. says it is
working on its own plans to enter the U.S. market, creating more
competition for domestic grocery chains such as Wal-Mart Stores
Inc. and Kroger Co., and other foreign entrants such as Ahold
Delhaize NV.
Record-low interest rates have been one of the major factors
fueling the wave of takeovers and investments, but the Federal
Reserve's interest rate increase in December may interrupt the
trend, said Christopher Kummer of the Institute for Mergers,
Acquisitions & Alliances, a Vienna-based think tank. He said
valuations have also started to look steep.
Lanxess, which in 2016 acquired two U.S. companies, doesn't
exclude another takeover in the range of a few billion dollars.
"Our goal clearly is expanding in the U.S.," said Mr. Zachert.
U.S. reindustrialization -- fueled by cheap raw materials -- is the
main reason that "not only we, but many other companies, have
suddenly become active in America," he said.
Oliver Schwarz, an analyst at Warburg Research, sees
acquisitions such as Laxness's purchase of Chemtura as sensible
strategic moves. The European chemical industry, he said, is
"treading water," so it's necessary for players to invest in growth
markets like the U.S. He added that Lanxess would have had a hard
time acquiring a company of a comparable size in Europe.
Write to Natascha Divac at natascha.divac@wsj.com
(END) Dow Jones Newswires
January 19, 2017 05:44 ET (10:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.