Swiss industrial conglomerate Georg Fischer (GF) is divesting its mechanical engineering and foundry divisions to refocus on Piping Systems and Building Flow Solutions. The sale of GF Machining Solutions to United Grinding is part of this shift, motivated by investor pressure and a decline in the mechanical engineering sector. GF’s recent acquisition of Finnish firm Uponor amplified the need for a streamlined approach. The move is expected to help reduce GF’s debt and stabilize its business.
For years, the model of industrial conglomerates has been fading. In Switzerland, prominent firms like ABB, Sulzer, SIG, and Dätwyler have shifted their focus toward their primary operations.
The only remaining entity from the previous Conzzeta Group is Bystronic, a machine manufacturer that was involved in various sectors, including chemicals and sportswear (Mammut). Now, Georg Fischer is also poised to streamline its operations.
Shifting Away from Cyclical Ventures
Established in 1802, the historic Schaffhausen-based company Georg Fischer (GF) recently revealed its decision to sell its mechanical engineering division to the private firm United Grinding. Moreover, GF is contemplating the sale of its Casting Solutions division, which primarily produces cast components made from light metals for the automotive sector.
Moving forward, GF plans to concentrate solely on its two connected divisions: Piping Systems and Building Flow Solutions. These divisions focus on manufacturing piping systems for various construction applications and are less affected by economic cycles compared to mechanical engineering and foundry operations.
Investor Frustration
The Building Flow Solutions unit, which specializes in indoor piping, was recently established through the acquisition of the Finnish competitor Uponor, finalized just a year ago for CHF 2.1 billion.
This acquisition marked the largest deal in GF’s history and effectively put an end to its status as an industrial conglomerate. In an interview, CEO Andreas Müller acknowledged that GF has struggled with a negative image as a conglomerate. However, the merger with Uponor has paved the way for a more strategic direction.
Müller believes that United Grinding is an ideal match for the mechanical engineering division, as both companies are Swiss-based and focus on producing machine tools for high-precision metal parts, including those used in aircraft manufacturing. While GF Machining Solutions operates from Biel/Bienne, United Grinding is located in Bern.
Acquisition Dynamics
United Grinding is majority-owned by investment firm Patinex, the enterprise of Swiss financier Martin Ebner, who also possesses stakes in various companies, including Geneva-based banking software firm Temenos and real estate group Intershop, along with owning the airline Helvetic Airways.
Müller noted that the portfolios of United Grinding and GF’s mechanical engineering segment align well with each other, stating, “There is no overlap.”
No layoffs are anticipated with this transition. United Grinding employs over 2,000 individuals globally, while GF Machining Solutions has around 3,400 employees, with 1,400 of them in Switzerland, indicating that the smaller firm is acquiring the larger one in this instance.
The Struggles of Mechanical Engineering
The agreed purchase price for GF Machining Solutions ranges from CHF 630 to 650 million, depending on the division’s ability to meet specific profitability targets over the next year.
Ebner appears to have timed his acquisition well, securing a relatively favorable deal amid a global crisis in the mechanical engineering sector. In the first half of this year, GF Machining Solutions managed only modest earnings (EBIT).
According to Helvetische Bank, GF could have commanded a higher price for the division two years ago, during a peak period for mechanical engineering. Investors reacted positively to the recent sale, with GF’s share price climbing by 15.6 percent to CHF 63.95 on Wednesday. Zürcher Kantonalbank noted, “The long-standing wishes of investors for a focus are now being fulfilled.”
Challenges in the Foundry Sector
The proceeds from the sale will assist GF in reducing its net debt, which surged following the Uponor acquisition, reaching CHF 2 billion by June 30, 2024, compared to just CHF 100 million the previous year.
Additionally, the anticipated sale of the foundry division—which faces significant challenges due to the automotive industry’s current downturn—could provide further financial benefits to the company. Müller is also considering potential sales to competitors in this category.
However, it seems unlikely that the Casting Solutions division, which employs around 3,700 people (500 in Switzerland), will attract a domestic buyer. Instead, a strategic buyer from the international market is anticipated, according to Müller.