Bosch acquires Johnson Controls-Hitachi unit
The USA is a regional focus for Bosch's targeted accelerated growth. With a share of sales of less than a fifth, the technology group has been rather weak in North America, and there have been indications for some time of an acquisition outside the dominant automotive segment.
At the end of June, information was leaked from investment banking circles that Bosch was interested in Whirlpool – the US competitor of its own household appliance business, which includes the Bosch, Siemens, Neff and Gaggenau brands. After the boom during the corona pandemic, and with weakness in new home construction, this sector is now suffering from a sharp drop in demand. In North America in particular, manufacturers of fridges, ovens and dishwashers are fighting for customers with large discounts.
The acquisition just announced of the heating, ventilation and air conditioning business of the Johnson Controls-Hitachi joint venture looks to be a convincing move for Bosch. The trend away from fossil fuels such as oil and gas towards heat pumps promises good opportunities. Bosch anticipates growth of 40% in this segment by 2030.
On the one hand, the acquisition represents a major step, with an acquisition price of around 7.4 billion euros. Bosch is almost doubling its annual turnover in this business segment to 9 billion euros. And Johnson Controls is receiving 16.7 times the operating profit (EBITDA) achieved last year for the North American division.
Four per cent of group sales
On the other hand, the acquisition represents only a small step towards more balance in terms of Bosch's consolidated sales, both in terms of regional distribution and in relation to the four segments. The 4 billion euros in acquired revenue account for just over 4% of Group sales last year. At 56 billion euros, the vehicle business accounted for just over 60%.
In order to achieve greater diversification, there will need to be further moves to follow the acquisition of the Johnson Controls-Hitachi AC assets. But Bosch has limited financial room for manoeuvre – despite an equity ratio of 44% and liquidity of 7.4 billion euros. Without higher profitability in the automotive business, it will be difficult to finance research, development and investments with its own financial resources in the long term. But this is the only way to grow and remain competitive.
