Heat Pump Maker’s $13.3 Billion Sale Raises Questions in Germany

The critical importance of heat pumps to the German economy was underscored this week when the sale of a family-owned maker of the heating machines to a U.S. company prompted a review by the government in Berlin.

Carrier Global Corp. said Tuesday that it had agreed to pay 12 billion euros, or about $13.3 billion, to acquire a unit of Viessmann Group, based north of Frankfurt, that produces heat pumps. The cash-and-stock deal would allow Carrier to expand in Europe and capitalize on the green energy transition underway on the continent, the company said.

It also comes days after Berlin announced a ban on new furnaces fired by fossil fuels, starting next year.

“Climate change, sustainability requirements and geopolitical factors are driving an unprecedented energy transition in Europe,” David Gitlin, chief executive of Carrier, said in announcing the deal. “Accelerated by government regulations and incentives, the transition creates a significant, long-term growth opportunity.”

Viessmann, a leading maker of heat pumps and related technology in Europe, is considered one of Germany’s small and midsize manufacturers, known as the Mittelstand companies, that make niche industrial products. Many of them are family-owned, and Viessmann’s decision to sell to a foreign manufacturer is a rare move that set off questions in Germany.

Robert Habeck, Germany’s economy minister, said on Wednesday that his ministry would review the deal, calling the measure routine for any acquisition of comparable size. But the review raised questions among Germans, given that such recent assessments have involved Chinese companies seeking to acquire stakes in German firms and focused on security issues.

Under German regulations, investments by a foreign company that would acquire more than 25 percent of shares will prompt a review by the German government. They are decided on a case-by-case basis. The country’s legal rules on foreign corporate takeovers were tightened in 2017, after Chinese companies seeking to invest in German tech firms raised objections from Washington.

Mr. Habeck rejected suggestions of security concerns, but he stressed the importance of ensuring that Germany remained competitive in the renewable energy sector, which the government views as a key element to economic growth. Germany managed to dodge a recession in recent months, but it forecast its economy to expand only by 0.4 percent this year.

High energy prices, driven up by Russia’s war against Ukraine and the ensuing dispute over natural gas, have been a drag on growth. They prompted Berlin to speed up the transition to renewable energy through fresh regulation and a series of economic incentives.

Last week, the German government approved the bill that would largely ban the installation of new gas and oil heating systems in homes across the country. The legislation still has to pass Parliament. About a dozen other countries across Europe are planning similar regulations or already have them in place.

Heat pumps, which run on electricity, are seen as a key element to the energy transformation undertaken by the government in Berlin. Half of German homes are heated by furnaces burning natural gas, which was promoted by the government for decades as an abundant, affordable and relatively clean fuel.

A gas-fired furnace, left, next to a wood-fired furnace in a house in Saxony, Germany.Credit…Katrin Streicher for The New York Times

That changed last year, when Russia began withholding natural gas flows in response to European sanctions aimed at punishing Moscow for invading Ukraine.

Under the terms of the deal, Viessmann will have a seat on Carrier’s board. It will also require Carrier to maintain the heating unit’s headquarters in Allendorf, for at least the next decade, while research and development sites must remain for at least five years.

Viessmann’s other divisions, which include making cooling systems and deep tech, will not be affected by the acquisition and continue to operate, the company said.

“It is important that the benefits of our energy policy, and profits generated by it, continue to benefit Germany as a business location,” Mr. Habeck told reporters.

Heat pumps are popular across much of Europe, including Scandinavia, France and Italy, and Carrier estimates the market is projected to triple in size in the next four years. The German government’s proposed ban on fossil fuel furnaces, which faces some opposition in Parliament but is expected to be approved, would further support growth.

Viessmann is one of several European makers of heat pumps, but Chinese manufacturers are already expanding their sales in the region, creating fears that they could wind up dominating the market by underpricing local rivals.

Viessmann and Carrier said that German-designed heat pump technology could be more widely produced, making the units more affordable and therefore more competitive on a wider scale.

“The world’s energy transition can only be managed successfully if companies think, act and collaborate on a global level,” said Max Viessmann, chief executive of the company founded by his grandfather in 1917 in his garage.

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