UPDATE 2-Daikin in talks to buy Goodman Global -Bloomberg

* Daikin in talks to buy Goodman from Hellman & Friedman

* H&F negotiating after rejecting roughly $3.6 bln bid

* Daikin shares down 3.5 pct, versus 0.3 pct drop in Nikkei

* Deal would make Daikin biggest player in sector-analysts

* U.S. remains most popular target for Japan M&As

(Adds details, share price)

TOKYO, Dec 7 (BestGrowthStock) – Japan’s Daikin Industries (6367.T: ),
the world’s second-biggest maker of air conditioners, is in talks
to buy U.S.-based rival Goodman Global Group from a U.S. buyout
firm, Bloomberg news reported on Tuesday.

Hellman & Friedman is negotiating a revised proposal for
Goodman after rejecting a roughly 300 billion yen ($3.6 billion)
offer from Daikin, the news service said, citing an unidentified
source with knowledge of the matter.

A Daikin spokesman declined to comment. Representatives at
H&F were not immediately available.

Acquiring Goodman Global would make Daikin the world’s
largest air conditioner maker, surpassing United Technologies
Corp (UTX.N: ) unit Carrier, and accelerate its expansion outside
the saturated Japanese market.

Daikin shares closed down 3.8 percent at 2,993 yen on the
report, underperforming a 0.3 percent fall in the Nikkei (.N225: )
benchmark, reflecting investors’ worries the company would look
to issue shares to finance such a deal.

CLSA analyst Morten Paulson estimated that Daikin’s
debt-to-equity ratio would jump to 1.3 from 0.8 if it tried to
fund the acquisition with straight debt.

“That’s not impossible, but I believe management would prefer
to keep it to 1.1. I guess that they would need to finance about
200 billion yen in debt, 100 billion yen in equity. That would
give the stock about 10 percent dilution,” he said.

“I can probably see it from the company’s perspective that
they would like to break into the U.S., but personally I would
probably rather see them using more resources on emerging

Daikin, which took over Malaysian-based O.Y.L. in 2006, has
touted its ambition to become the world’s biggest player in the
heating, ventilation and airconditioning sector (HVAC).

H&F, a San Francisco-based private equity firm, agreed to pay
$1.8 billion in cash for Goodman Global in October 2007,
including $1.1 billion of its own capital. The transaction also
included assumed debt and other financing for a total of $2.65

On that basis, the private equity firm will make nearly 3.5
times its original investment if it sells the company for $3.63

Last month, Goodman Global withdrew an initial public
offering in which it planned to raise up to $500 million to pay
down debt. [ID:nSGE6AB0KP]

Backed by the strong yen, outbound M&A by Japanese firms has
doubled with a total value of $31.5 billion in the first nine
months of 2010, the second highest volume recorded for the period
since 2000, according to Thomson Reuters data.

In terms of number of announced deals, the period marked the
highest ever with 367 deals. The US remains the most targeted
nation based on number of deals by Japanese companies, with
China in second place.

(Reporting by Isabel Reynolds, James Topham and Junko Fujita
in TOKYO and Michael Flaherty in HONG KONG; Editing by Nathan
($1=82.67 Yen)

UPDATE 2-Daikin in talks to buy Goodman Global -Bloomberg