No details have been revealed yet about any possible rationalisation plans or the impact of the acquisition on jobs in the two companies.
According to the market analyst IHS, the combined revenues from Danfoss and Vacon currently represent more than 10% of the global LV drives market, putting a merged business just behind the market-leaders ABB and Siemens. Both partners have strong market shares in the EMEA and Asia-Pacific regions where traditionally only ABB and Siemens have competed for the top market share. While Danfoss has traditionally focused on the HVAC industry, the addition of Vacon’s business would diversify its sales channels and strengthen its product portfolios in the power generation and building automation sectors.
“We have a clear strategic ambition to be one of the absolute top players in the businesses where we operate,” says Danfoss CEO, Niels Christiansen. “Vacon is a very strong and innovative player and by creating this new drives business we can ensure a strong long-term growth trajectory.”
“After a careful examination of Danfoss' offer, the Board of Directors of Vacon has unanimously decided to recommend that the shareholders accept it,” says Vacon’s chairman, Panu Routila. “Vacon is truly one of the great industrial success stories, even globally speaking. By joining forces, the two companies will create a Nordic-based global player – a new AC drives business with the clear ambition to build a leading position in the AC drives market.”
IHS drives analyst Kevin Schiller points out that a combined Vacon and Danfoss business will be different from its rivals. “ABB and Siemens cultivate much of their drives business alongside their sizeable share of the integral AC motor market, and are able to offer complete system solutions across all power ranges,” he says. “Conversely, Danfoss has a comparatively undersized standalone motor market share.
“However, with significant market share in drives integrated with motors and end-equipment, the new Danfoss and Vacon integration will most likely affect the competitive landscape in lower power ranges – below 50kW,” Schiller suggests.
Vacon has production and R&D facilities in Europe, Asia and North America, and sales offices in 30 countries. In 2013, its revenues amounted to €403m, and the company employs around 1,600 people globally. As well as producing AC drives for motor controls, the company makes inverters for renewable energy applications.
Vacon's president and CEO, Vesa Laisi, believe that its customers “will benefit significantly from the two companies joining forces as they will bring even more competitive, innovative, and attractive AC drives to the market. Today, Vacon is stronger than ever, and it has a great future ahead together with Danfoss.”
The offer is subject to approval by relevant authorities, such as competition authorities, and Danfoss gaining control of more than 90% of Vacon’s shares.
• News of the acquisition came as Vacon reduced its revenue and operating profit guidance for 2014. Previously, it had estimated that its revenues would increase by 5–15% in 2014 and its operating profit percentage, excluding one-time items, would be 11–13%. It now says that the figures will “increase” from the corresponding period in 2013, when revenues totalled €403m and the operating profit percentage was 10.1%. The main reason for the revised guidance is the increasing risks related to revenue growth. Vacon’s expectations regarding order intake have weakened for the rest of the year. It adds that its revised guidance for 2014 will not affect its long-term financial targets.