Nordic drives companies aim for a leading AC drives position

16 September 2014

Danfoss has announced a public tender offer for all shares of AC drives company, Vacon. The company is a good match to help Danfoss achieve its strategic focus on creating profitable growth. Both companies are significant players in the AC drives business and together it is hoped that they will gain an even stronger market position.

“After a careful examination of Danfoss’ offer, the Board of Directors of Vacon has unanimously decided to recommend that the shareholders accept it... By joining forces, the two companies will create a Nordic-based global player – a new AC drives business with the clear ambition to build a leading position in the AC drives market,” said Panu Routila, chairman of the board at Vacon. 

Explaining more about the move, Niels B. Christiansen, CEO at Danfoss, said: “We have a clear strategic ambition to be one of the absolute top players in the businesses where we operate. Vacon is a very strong and innovative player and by creating this new drives business we can ensure a strong long-term growth trajectory.” 

The offer is subject to approval by relevant authorities, such as competition authorities, and Danfoss gaining control of more than 90% of the Vacon shares. 

If the acquisition goes ahead it would result in the union of two of the 10 largest variable frequency drive suppliers globally. According to consultant, IHS, the combined low voltage drive revenue from the two companies represent over 10% of the global market value -  slightly less than the estimated market shares for ABB and Siemens, who are the two largest suppliers of low voltage drives globally. 

According to a Danfoss press release, the combination of the Vacon and Danfoss drive businesses is expected to create ‘a new AC drives business with the clear ambition to build a leading position in the AC drives market’. While VFD market analyst Kevin Schiller from IHS agrees that the acquisition will secure a stronger foothold for the Danfoss and Vacon drive products, the newly formed drives business resulting from the acquisition of Vacon by Danfoss will not resemble its competitors. “ABB and Siemens cultivate much of their drives business alongside their sizeable share of the integral AC motor market, and are able to offer complete system solutions across all power ranges. Conversely, Danfoss has a comparatively undersized standalone motor market share. However, with significant market share in drives integrated with motors and end equipment, the new Danfoss and Vacon integration will most likely affect the competitive landscape in lower power ranges – below 50 kW.”

Through the acquisition of Vacon, Danfoss hopes to become the leading supplier of drives within the Nordic region. This region is expected to grow at a slightly slower pace than the market average, at just over 7% CAGR, from 2013 to 2018. While Danfoss has traditionally concentrated on the HVAC industry, the addition of Vacon’s business will diversify sales channels and strengthen product portfolios in the power generation and building automation sectors.

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