This Research Note reviews Carrier’s announcement to divest its commercial refrigeration business to Chinese manufacturer, Haier.

This transaction is part of a series of divestments, brought about by the acquisition of Viessmann Climate Solutions. The state of play of Carrier’s portfolio transformation activities is assessed including the exit of the fire and security businesses.

Carrier Commercial Refrigeration Transaction

On 13 December 2023, Carrier announced a definitive agreement to sell their Commercial Refrigeration (CCR) business to Haier for $775 million (about 16.5X EBITDA).

There is some discrepancy between the Carrier and Haier purchase price announcements on this transaction. Haier has valued its 100% equity acquisition at approximately $640 million which, it says, represents 11x P/E.

Carrier reported the deal gave its commercial refrigeration business an enterprise value of $775 million, including about $200 million of net pension liabilities.

Carrier Commercial Refrigeration has more than 4,000 global employees and a sales and service network spanning Europe and the Asia Pacific region. Its brands include Profroid, Celsior and Green & Cool. 2022 sales for the divested portion amounted to $1.2 billion.

Note that Profroid mechanical systems (around $0.1 billion in 2022 sales) were subsequently included in the divestment with the commercial refrigeration cabinets business according to the Q2 earnings presentation of 27th July 2023. Carrier Transicold transport refrigeration, Sensitech and its Lynx digital cold chain platform are not included in the transaction.

The transaction marks Haier Smart Home’s expansion from its existing household refrigeration business into the commercial refrigeration business, creating additional future growth opportunities by expanding its presence to food retail refrigeration and cold storage.

The two companies have operated a joint venture business, Qingdao Haier-Carrier Refrigeration Equipment Co, since 2001. The JV is committed to providing advanced energy-saving systems, including CO2 refrigeration systems, for customers in the Asia Pacific region.

Status of Carrier Portfolio Transformation

“Executing this definitive agreement demonstrates continued progress in our portfolio transformation, further positioning Carrier as the global leader in intelligent climate and energy solutions. Following completion of our planned transactions, we will be a more focused, higher growth business, operating in attractive global market segments and benefiting from long-term secular tailwinds, said Carrier chairman and CEO David Gitlin.

The commercial refrigeration divestment is the next step in Carrier’s portfolio transformation, announced less than a week after reporting the $4.95B divestiture of their Global Access Solutions business.

Carrier Fire Businesses

Carrier Fire businesses, which reported $2.1 billion sales in 2022, are still to be divested including the Kidde residential fire brand, Edwards and GST commercial fire brands and Autronica, Marioff and Det-Tronics industrial fire brands.

According their Q3 2023 investor presentation, Carrier are working towards creating a standalone industry leader for their residential and commercial fire businesses, with an expected public trading in late spring 2024. Their industrial fire businesses will be separately exited.

Viessmann Climate Solutions

In 2024, Carrier will be focused on integrating the Viessmann Climate Solutions operation, following the European Commission’s approval of the €12 billion cash and stock deal on 18th December 2023.

This marked the final regulatory clearance required, with Carrier on track to close the transaction on January 2, 2024, subject only to conditions to be satisfied on the closing date. The huge deal brings Carrier a range of residential air-to-water heat pumps, together with solar photovoltaics and battery storage product lines.

Viessmann Climate Solutions were on track in 2023 for around €4 billion sales and €0.7B EBITDA.  The acquired business will become a major driver of Carrier’s growth strategy for the residential and light commercial HVAC business in Europe.

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.