Viessmann/Carrier: €12bn heat pump deal marks time of transition


In family companies, family priorities usually come before those of the company. That may explain the decision of Germany’s Viessmann family to sell their heat pumps business. This might otherwise be surprising: green home heaters are in growing demand and owners of private Mittelstand engineers rarely sell out.

Carrier Global of the US is buying Viessmann Climate Solutions for in stock and cash in the wake of a family transition. Maximilian Viessmann, son of long-serving chief executive Martin, fully took over that role about a year ago.

A different kind of handover will occur in Germany next year. New gas and oil boilers will be banned. VCS can expect to do nicely from sales of domestic heat pumps, already bolstered by higher gas prices.

German politicians who fear the takeover will trigger job losses plan a review of the deal. The US Inflation Reduction Act provides multibillion subsidies for US domestic manufacturing and installation of heat pumps.

That helps explain the generosity of the offer from the US heating and air conditioning group: €9.6bn in cash and new shares equal to a 7 per cent stake. An enterprise value of 17 times this year’s ebitda is a substantial premium compared with Carrier on 12 times or Italian peer Ariston on 9 times.

The price should fall to 13 times ebitda with annual cost savings of $200mn by year three. Carrier claims 85 per cent will come from materials sourcing. But Carrier had $4.4bn of sales last year in Europe so there is a big operational overlap.

Superior ebitda margins at VCS, almost 18 per cent, reflect success in heat pumps and justify the higher price. They typically retail at three to four times the price of traditional boilers. They account for about 40 per cent of VCS’s sales when accessories are included.

German politicians will focus on scope for jobs to migrate. Investors should note a more significant migration: of domestic heat pumps from niche domestic products to the commercial mainstream.