Schindler Holding could use cash for buys; expects opportunities in China
Schindler Holding (SCHN:SW), the Switzerland-based provider of elevators, escalators and related services, could spend its capital on acquisitions and is hoping to buy more assets in China, according to executives.
On Friday’s 4Q14 earnings call, an analyst noted that Schindler had cash on its balance sheet of around CHF 2.7bn and asked about the company’s strategy for these funds.
CFO Erich Ammann said Schindler had a lot of domestic cash which was not affected by exchange rates and gave the company more firepower. He said it would use this additional capital to make an extraordinary dividend and buy back shares.
“And obviously, we are continuously screening the M&A market. We believe that there'll be more targets coming up also in China,” the CFO continued, noting that this market could slow down somewhat and provide greater opportunities for M&A.
Later on the call, an analyst asked if Schindler had any white spots or segments for which it would pursue buys in China. CEO Silvio Napoli said the company did not typically discuss details of its M&A plans.
“That China is an area of interest, I think, goes by itself based on what we said,” Napoli remarked. “We're looking for, at the risk of saying something obvious, solid companies with a focus on technology, most of all safety and quality, in an area that is ideally complementary to ours.”
The CEO said while organic growth was Schindler’s first priority, it was very keen to find another asset similar to XJ-Schinder.
“It is true that the slowdown in the market may provide new opportunities because companies that maybe before felt they could conquer the world, maybe now they reconsider that in a different way,” he added.
Schindler announced in July last year it had reached an agreement with the majority shareholders of XJ-Schindler (Xuchang) Elevator Co. to increase its holding from 46% to 51%.
In 2011, Schindler established a joint venture with the Chinese elevator and escalator company and acquired a 46% stake. The deal also gave Schindler the right to acquire a further 5% of the company in each of the forthcoming three years and to raise its participation to 66% in total by 2017.
XJ-Schindler, based in Henan Province, has its own design, manufacturing, installation and maintenance operation and was expected to generate revenues of more than CHF 300m for the full year 2014, according to a press release.
Schindler develops, manufactures, installs, maintains and modernizes elevators, escalators, moving walks and transit management solutions for application requirements including train stations and hospitals, as well as commercial and residential buildings.
The company has acquired in a wide range of geographies in the past decade, including Continental Europe, Asia, the Middle East and North America. Disclosed deal values have typically been less than CHF 100m.
While Schindler usually handles financial and legal advisory in-house when acquiring, it has used in-country law firms on several occasions, according to the Mergermarket M&A database. For a Canadian purchase in 2013, it used Osler, Hoskin & Harcourt, while Saudi Arabia-based Legal Advisors in Association with Baker McKenzie was retained for a deal in the country in 2009.
Deloitte and US law firm MorrisAnderson & Associates were used for a Japan-based acquisition in 2005.
Schindler has a market capitalisation of CHF 16.6bn.