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Japanese bathroom giant Lixil Group has agreed to buy Germany's Grohe in a $4.1 billion deal, its second purchase in recent months and one that would turn it into the sector's biggest global player.
The Dusseldorf-based maker of bathroom appliances confirmed Thursday that it was being taken over by Lixil in a buyout which also marks Japan Inc's biggest-ever investment in Germany.
The deal comes three months after Lixil snapped up ASD Americas Holding Corp, the parent company of the American Standard bathroom brand, for 53.1 billion yen ($538 million).
It is the latest in a string of overseas takeovers by Japanese firms scrambling to counter a shrinking home market.
Other recent cross-border deals by Japanese firms include mobile carrier SoftBank's $21.6 billion takeover of US-based Sprint-Nextel and Mitsubishi UFJ, the country's biggest lender, buying Thailand's Bank of Ayudhya for $5.6 billion.
Japanese drinks giant Suntory said earlier this month it would buy the top-selling Lucozade and Ribena brands from British drugs firm GlaxoSmithKline (GSK) for $2.1 billion.
The moves are aimed at expanding beyond Japan's borders where firms are wrestling with unfavourable demographics as the population rapidly ages while the birth rate falls.
Despite a sharp decline in the yen over the past six months, the Japanese currency's historically high levels in recent years made firms' overseas acquisitions relatively cheaper.
On Thursday, Grohe said the two companies had entered into an agreement for Lixil to buy an 87.5 percent stake in the German firm with the deal slated to close in the first quarter of next year, following regulatory approvals.
Lixil is joining up with the government-backed Development Bank of Japan to complete the takeover, which includes the assumption of debt.
"This transaction represents the largest-ever German investment by a Japanese company," Grohe said in a statement.
Grohe's owners, investment fund TPG and Credit Suisse's private equity arm, have been actively trying to sell the company but also eyed a share offering if any buyout plan collapsed, the Wall Street Journal reported earlier.
Lixil shares were up 3.91 percent to 2,099 yen with Grohe confirming the deal after the Tokyo market had closed Thursday.
The stock fell more than six percent when the Journal reported the deal this week, as investors fretted that any share sale to fund the Grohe purchase could dilute the value of their stock.
"The move is certainly aggressive, coming on the heels of a just-completed acquisition," Yoshihiro Okumura, general manager at Chibagin Asset Management, said at the time.
Lixil, which posted sales of 1.4 trillion yen in its fiscal year to March, groups several makers of toilets, kitchen furniture, windows and other household brands.
"The transaction represents a significant step in the successful implementation of Lixil's strategy to become the global leader in the building materials and housing equipment industry," it said in a statement.
Lixil President Yoshiaki Fujimori described Grohe as one of the "most well-known brands in the global sanitary market".
Grohe, which said its chief executive David Haines would remain in his job, has about 9,000 employees worldwide and reported sales of $1.4 billion euros ($1.9 billion) last year.
By acquiring the German firm, Lixil will be able to ramp up its business in Europe. Two years ago, the Tokyo-based company bought Italian construction engineering group Permasteelisa for about 575 million euros.
-- Dow Jones Newswires contributed to this report --
© 2013 AFP
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