Milan When Paolo Merloni looks at the German heating market, he sees one thing above all: sales potential. “There is a very outdated basis in the heating sector,” says the Italian. The heating systems installed here are much older than in Italy, France or the Netherlands. For the head of the Ariston Group, one of the world’s largest manufacturers of air conditioning, heating and hot water systems, Germany is therefore a growth market.
The Italians recently closed the biggest deal in the company’s history: The company Centrotec Climate Systems (CCS), which owns brands such as the heat pump manufacturer Wolf or the room fan manufacturer Brink, is now part of Merloni’s company empire. The air conditioning manufacturer Pro Klima and the fan manufacturer Nedair are also part of the package. Merloni doesn’t see many cost synergies, at most in purchasing. The deal is “not a cut, but a development measure,” explains the 54-year-old in his Milan office.
Merloni transferred around 635 million euros to Mainburg in Lower Bavaria, plus more than 41 million shares in the company, which has been listed in Milan since 2021. Volume of the deal: around one billion euros.
Merloni does not define it as an acquisition, but as a partnership. Also because Centrotec’s largest shareholder, Guido Krass, made a conscious decision in favor of the Italians and will in future hold an eleven percent stake in Ariston – after Merloni he will then be the second-largest individual shareholder. In addition, the German will join the Board of Directors and the Strategy Committee. “A wonderful vote of confidence,” says Ariston boss Merloni. With the takeover, his heating empire has grown to more than three billion euros in sales and over 10,000 employees.
It is not the first acquisition for the company, which was founded in 1930 as a scales manufacturer on Italy’s Adriatic coast. Since 2014, Merloni has taken over around 18 companies: in the USA, in Israel, in Australia. But as a result of the merger, Germany suddenly became the most important market for Ariston – in terms of sales, but also the number of employees.
Germany’s heating systems are outdated
“We expect that this market will continue to grow,” Merloni is convinced. Wolf and Brink in particular, the most important CCS brands, are now set to expand. “They have the advantage of having a global group behind them and benefit from the size and access to the market and the technologies,” says the Ariston boss. In Europe he observes a strong change towards more climate-friendly heating systems.
According to the Federal Association of the German Heating Industry, 980,000 heaters were delivered last year – more than in 27 years. However, gas heaters still have a market share of 61 percent. “In particular, the installation of new heating ensures high sales potential that will remain for years to come,” writes the Sparkassen-Finanzgruppe in its latest industry report.
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Europe currently accounts for approximately 67 percent of Ariston’s group sales. After the integration of the Germans, this proportion will increase to at least 70 percent. About 20 percent is in Africa, the Middle East, Asia and Australia. The North American continent accounts for around ten percent. Ariston has a total of 31 plants around the world, and since 2005 there has also been a plant in Russia with a few hundred employees.
The business there was severely shut down when the Ukraine war broke out. The plant produces almost exclusively for the domestic Russian market. But the Italians don’t want to withdraw completely. “We put our people first,” says Merloni. Salaries would continue to be paid, and support would continue to be given to employees and their families in Ukraine, where, according to Merloni, a few dozen work for Ariston.
The Italian manufacturer of air conditioning technology relies on the German market.
(Photo: Ariston)
The war and the pandemic have claimed Merloni. There were also problems in the supply chain, for example with semiconductors or steel. “But overall, I’m happy with how the company, together with our suppliers, has managed to get through this difficult time,” says Merloni. After all, the factories never stood still.
In some areas, however, Ariston could not avoid price increases. “We partly compensated for the price increase with efficiency and productivity, but partly we also had to rebalance the price lists.” In 2021, sales were almost two billion euros, an increase of 19 percent compared to the previous year. The profit margin before taxes was just under 14 percent.
Strong growth rates in the air conditioning industry
Merloni’s shopping spree is far from over. While there are currently no specific candidates, Merloni is evaluating “a number of possible ideas” in Milan. Ariston is always on the lookout for new technologies or market niches. “If opportunities arise that are consistent with our strategy, we will pursue them,” says the Ariston boss.
The entire industry is in the process of consolidation. In 2018, the Japanese air conditioning giant Daikin took over the Austrian refrigeration technology manufacturer AHT, and last summer the Japanese (sales: around 23 billion euros) also bought the Italian pump manufacturer Duplomatic. The thermotechnology division of Bosch once became one of the largest heating manufacturers in Europe through the takeover of Buderus. Viessmann from northern Hesse only took over the majority stake in the ice storage provider Iscoal at the beginning of the year.
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“The heating, ventilation and air conditioning market is experiencing tremendous growth rates, which puts this industry at the forefront of the energy transition – and also for investments in this transition,” says Andrea Biscia, analyst at Swiss financial group Decalia.
Ariston is also currently investing in hydrogen. They already have highly efficient boilers on offer there that are certified for the operation of natural gas-hydrogen mixtures; up to 30 percent hydrogen is already permitted. At the same time, tests are being run with 100 percent hydrogen as the heating medium. According to Merloni, hydrogen is also conceivable in thermally activated heat pumps.
The business administration graduate Merloni began his career at the management consultancy McKinsey. In 1995 he joined the company as a salaried employee, which his father, Francesco, was still running at the time. After various managerial positions, he became CEO of the group in 2004. In 2011 he handed over the operational business to a manager and has been Executive Chairman since then.
Despite its global size, the group is still a family business: one of Merloni’s two sisters sits on the board. Father Francesco is still an honorary member of the board at the age of 97. “The company is his passion, his source of life,” says his son Paolo. As soon as the engineer can, he wants to go to Wolf in Germany to take a look at the new factory.
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