KUKA Sells U.S. Division to Simplify Regulatory Approval of Chinese Takeover

KUKA Systems Aerospace North America sold to U.S.-owned Advanced Integration Technology Inc.

KUKA offers a variety of industrial robots for automated manufacturing. (Image courtesy of KUKA.)

KUKA offers a variety of industrial robots for automated manufacturing. (Image courtesy of KUKA.)

KUKA, a large German-based supplier of intelligent automation systems, has sold its U.S. aerospace division, KUKA Systems Aerospace North America, to U.S. automation company Advanced Integration Technology Inc. The sale is the latest development in the takeover of KUKA by Chinese home appliance manufacturer, Midea.

Back in May, Midea announced an investment agreement to take over KUKA with an offer of €4.57 billion (USD$5.17 billion). This offer sought to extend Midea’s then-stake of 13.5 percent of KUKA shares to beyond thirty percent.

Just one month later, on June 16, the investment agreement was formally launched. By the time July rolled around, Midea had acquired a 76.4 percent stake in KUKA, spending a total of €2.9 billion ($3.2 billion) to purchase 25 million additional shares in the German automation company.

But Midea didn’t stop there.

By August 3rd, Midea’s extended acceptance period to purchase KUKA shares ended. The Chinese company had acquired almost complete ownership of KUKA with a hefty 94.55 percent stake. Their success probably had a lot to do with their offer of €115 ($127) per share, considering the trading value of €107 ($119).

So, why the sale of KUKA Systems Aerospace North America? It comes down to U.S. regulations.

Two U.S. authorities, CFIUS (Committee on Foreign Investment in the United States) and DDTC (Directorate of Defense Trade Controls) are currently reviewing the Midea takeover, considering KUKA’s military and security applications in the U.S.

KUKA AG (Aerospace Group) focuses on automation in aerospace manufacturing, meaning the U.S. division is subject to U.S. aerospace security regulations.

By selling the North American KUKA AG division to a U.S.-owned company, Midea can simplify the process of obtaining regulatory approval for the takeover. This process may be hindered by the fact that, as reported by Reuters, there’s rising opposition in Germany and the U.S. to Chinese control of strategic technologies such as intelligent automation. The push for control of such technologies is directly in line with China’s Made in China 2025 policy plan to maintain China’s manufacturing domination.

KUKA Systems Aerospace North America will maintain its core executive team, led by Group VP Robert Reno, despite the acquisition. Neither party has disclosed the financial terms of the sale.

For more about Made in China 2025, read What is Service-Oriented Manufacturing and Why is China Promoting it?

Written by

Michael Alba

Michael is a senior editor at engineering.com. He covers computer hardware, design software, electronics, and more. Michael holds a degree in Engineering Physics from the University of Alberta.