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China’s Haier to Buy GE’s Appliance Unit for $5.4 Billion
Source:Bloomber Business | Author:Daniela Wei Stephanie Wong | Publish time: 2016-01-18 | 251 Views | Share:



China’s Haier Group agreed to buy General Electric Co.’s appliance business for $5.4 billion in the country’s biggest acquisition of an overseas electronics company.



The group’s Qingdao Haier Co. signed an agreement with GE and the transaction, which will be paid in cash, is targeted to close in mid-2016, according to a statement. While the boards of GE and Haier have approved the deal, it’s still subject to shareholder and regulatory approval, it said.


Buying a century-old business that makes $8,500 refrigerators from the likes of GE would underscore the rise of a Chinese company once known for making cheap fridges for college dormitories. It also highlights Haier’s global ambitions as the acquisition would help the company expand in the U.S., one the markets it’s trying to focus on besides Europe and Japan.


“It may be a step for the Chinese company to build up an international network, while its overseas exposure now is still small,” Andrew Song, an analyst in Guotai Junan Securities Co., before the announcement. “It’s also likely that they will have more synergy as Haier is developing smart appliances.” 

If completed, the size of the deal would make it the largest Chinese purchase of an electronics business overseas, surpassing state-backed Tsinghua Holdings Co.’s plans for a $3.8 billion investment in Western Digital Corp. announced last year and Lenovo Group Ltd.’s $2.8 billion acquisition of Motorola Mobility Group in 2014, according to data compiled by Bloomberg.



GE was seeking another suitor for the unit after an agreement with Electrolux ABcollapsed following opposition from the U.S. Justice Department. The business drew offers from suitors including China’s Midea Group Co., people with knowledge of the matter said in January.


Haier’s purchase price is $2 billion more than the $3.3 billion Electrolux had agreed to pay for the business. The Chinese company said it paid a premium for GE’s long history, brand value as well as its supply chains. The deal will also help it tap the strong consumer spending in the U.S. and its advanced technology.


GE Appliances will continue to be headquartered in Louisville in Kentucky and run by its current management team. Shanghai-listed Qingdao Haier, whose shares have been halted since Oct. 19, will continue to be suspended on Jan. 18.


The deal, which will be funded through the company’s capital and loans, will need anti-trust approval from authorities in U.S., Mexico, Canada and Colombia.


Overseas Expansion

Haier has used international acquisitions in the past to achieve quick expansion and to consolidate its overseas resources. The last major overseas purchase was completed in 2012 when it bought the control of New Zealand’s Fisher & Paykel Appliances Holdings Ltd. for about NZ$742 million ($478 million). It also took over part of Sanyo Electric Co.’s washing machine and refrigerator businesses from Panasonic in March to expand its presence in Southeast Asia.


Midea is China’s biggest manufacturer of appliances, with a 17.1 percent share of the country’s market in 2015, followed by Qingdao Haier with 7.9 percent, Euromonitor International data show. Haier had a 1.1 percent share of the U.S. appliance market last year, according to Euromonitor.


GE and Haier also announced Friday they will cooperate in industrial internet, healthcare and advanced manufacturing. Both companies will also work together to develop and grow affordable consumer health initiatives in China, according to the statement.


Hong Kong-listed Haier Electronics Group Co. was increasing capital spending last year as it seeks to capture a greater share of the country’s e-commerce sales and develop more Web-connected appliances users can control with their smartphones, Chairman Zhou Yun Jie has said in an interview.


The company has already rolled out smart appliances such as heaters you can turn on with your mobile phone, and washing machines which adjust their cleaning functions according to clothing load.

 

It showcased its latest technology at the International Consumer Electronics Show in Las Vegas this month.