Whirlpool has received a nod from the China Securities Regulatory Commission (CSRC) to go ahead with its previously announced acquisition of 51% stake in Hefei Rongshida Sanyo Electric Co. Ltd.
With this development, the company has successfully cleared all the regulatory hurdles necessary to acquire this leading Chinese appliance manufacturer.
The company is now looking to close the deal by the end of third quarter or early fourth quarter of 2014 after completing the final administrative processes and approvals.
Whirlpool does not expect any significant impact on its earnings and cash flows in 2014 from this deal, expecting the transaction to become accretive in the initial year of integration.
In August last year, Whirlpool had announced that it has entered into a deal to acquire 51% stake in Hefei Sanyo for which it is expected to pay about $552 million in cash (as per the exchange rates as of August 2013).
The agreement involves purchase of all shares owned by Sanyo Electric Co. (China) Ltd and Sanyo Electric Co. Ltd. Further, Whirlpool will acquire the new Hefei Sanyo shares through a private placement deal.
The deal will help to further Whirlpool’s long-term goal of expanding its presence in China. Following the completion of this deal, Whirlpool plans to commit capital and technical resources in building Hefei Sanyo’s research and development, and product innovation capabilities.
Hefei Sanyo operates as a joint venture between former Hefei Rongshida Group Co. Ltd., Sanyo Electric Co. Ltd. and Sanyo Electric (China) Co. Ltd., which is a wing of Panasonic Corporation. Hefei Sanyo reported revenues of $636 (£381) million in 2012.
Currently, Whirlpool’s reach in China is limited to the high end consumers. This deal will give Whirlpool a better platform to penetrate into the Chinese market as Hefei Sanyo boasts a powerful nationwide distribution platform and a huge manufacturing existence with prospects for growth.
Being one of the largest domestic players, Hefei Sanyo has good research and development facilities as well as product innovation capacity. Its location in the appliance hub of Hefei is also an advantage.