Carrier To Acquire Viessmann For $13.2B
This 'strategic action' will help Carrier expand its global HVAC business.
Carrier has conditionally committed $10 million in growth equity to Montana Technologies to foster commercialization of Montana's AirJoule technology.
Image courtesy of Carrier Global Corp.
Carrier announced it will acquire Viessmann Climate Solutions, the largest segment of Viessmann Group, in a cash and stock transaction valued at €12 billion ($13.2 billion). By acquiring Viessmann Climate Solutions, a 106-year-old privately owned German company, Carrier says it will gain a prestigious and high-end brand in Europe, which is the fastest-growing sector of the global heat pump and energy transition markets.
"The acquisition of Viessmann Climate Solutions is a game-changing opportunity," said David Gitlin, chairman and CEO of Carrier. "Climate change, sustainability requirements, and geopolitical factors are driving an unprecedented energy transition in Europe. Accelerated by government regulations and incentives, the transition creates a significant, long-term growth opportunity. Viessmann Climate Solutions is uniquely positioned to capitalize on this opportunity with its premier brand, highly differentiated distribution channel, and innovative product offerings.”
This acquisition is especially important, said Gitlin in Carrier’s first quarter 2023 earnings conference call, because while the mega trends reshaping the industry are global -- including climate change and sustainability, energy security, and the rapid adoption of green energy solutions – they are the most acute in Europe. He said that the European Union (EU) has long been out in front on sustainability, with a commitment to cut greenhouse gas emissions by 55% by 2030. To achieve this goal, RePowerEU -- the European Commission's plan to make Europe independent from Russian fossil fuels well before 2030 -- aims to double the current rate of individual heat pumps to reach 10 million additional units over the next five years.
“Seventeen European countries have announced or implemented bans on newly installed fossil fuel heating systems for homes, which has been supported by government subsidies,” said Gitlin. “The result is massive growth. There are 8.5 million heat pumps in European homes, which is expected to increase 25% annually to 40 million by 2030. Residential battery sales are also projected to increase over 20% annually during this timeframe, with a double-digit annual increase in residential solar PV sales as well.”
Carrier does not offer solar PV and home battery solutions today, said Gitlin, which is why the acquisition of Viessmann Climate Solutions provides the company with an ideal opportunity to pursue an incremental, fast-growing, annual market of $35 billion. To achieve this impressive figure, Gitlin pointed to Viessmann’s climate ecosystem, One Base, which seamlessly interconnects solar PV, batteries, and heat pump systems through a common digital platform, allowing customers to operate their energy system via an app. He said that the platform bundles devices and electronic applications into one single climate and energy solution for the home.
“This broad suite of offerings introduces a new addressable market to Carrier,” he said. “A heat pump sells for about 4x the price of a boiler. When you add solar PV, battery, and accessories and services, the installed price can be as high as 15 to 20x the installed price of a standalone boiler. The result is Carrier’s ability to now pursue a $35 billion, fast-growing market opportunity.”
In the conference call, Gitlin also commented on how Viessmann’s technologies could complement Carrier’s existing portfolio.
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“Think about some of the things they do very well,” he said. “They are very much out in front on natural refrigerants. In terms of their heat pump, it actually uses 50% less floor space, and requires significantly less installation time, which again, when you have a shortage of qualified installers all across Europe, that's enormously differentiating. That can provide a lot of value to Carrier outside of Viessmann.”
In addition to the Viessmann acquisition, Carrier announced plans to exit its Fire & Security and Commercial Refrigeration businesses over the course of 2024. The planned exits do not include UTEC, Fire & Security's controls business for residential HVAC customers, or Carrier Transicold's transport refrigeration, Profroid mechanical systems, and Sensitech monitoring businesses.
“While Fire & Security and Commercial Refrigeration are great businesses with incredible, customer-focused teams, the planned exits sharpen the strategic focus Carrier has gained through its 2020 spin-off from United Technologies,” said Gitlin.
As for its newest acquisition, Gitlin said that Carrier “looks forward to welcoming Viessmann’s 11,000 team members to the Carrier family and Max Viessmann, CEO of Viessmann, to the Carrier Board of Directors at closing, which is expected around the end of 2023.”
Carrier reported that its first quarter sales were $5.3 billion, up 13% compared to the prior year, and organic sales grew 4% over the same period. Net income was $373 million and adjusted net income was $442 million.
“The Carrier team continues to execute well with all financial performance metrics coming in better than we expected,” said Gitlin. “We delivered another quarter of double-digit growth in commercial and light commercial HVAC, global truck and trailer, aftermarket, and controls, which shows the strength of our execution and strategic focus.”
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