Midea Electric Appliances Co., Ltd. the home appliance maker based in China, announced lately that it planed to buy a 25% stake in the Hefei-based washing machine maker Hefei Royalstar Washing Machine Co., Ltd. (Royalstar).
It is an effort to boost Midea’s white goods business. In detail, the company will, through its 100% owned subsidiary Midea Electric Investment (BVI) Ltd., acquire the 25% stake from Maytag International Investments IBV (Maytag I), which is controlled by Midea Group, for CNY 68.1626 million. After the deal, Midea will have 100% of Royastar.
The target company Royastar is engaged in the washing machine R&D, design, manufacture, sales, and after-sale service. It was previously 75% owned by Midea and 25% by Maytag.
For the first three quarters of this year, Royastar harvested a net profit of CNY 32.72 million. And for the full year, its net profit is predicted to see a year-on-year growth of more than 60%. The overall control over Royastar will benefit Midea’s long-term development. The deal is expected to lift Midea’s 2009 earnings per share by CNY 0.01.
Midea is striving forward the nation’s leading refrigerator company and leading washing machine company within the coming three to five years. Now, the company is focusing on the integration of its products and brands.
In recent years, Midea has continued acquisitions and mergers in the refrigerator and washing machine sectors, in a bid to become the No. 1 in the nation’s white goods market.
As early as November 2004, Midea Group has bought a 50.05% stake in Royastar. And in February 2008, Midea purchased 24.01% of China’s washing machine giant Jiangsu Little Swan Group Co., Ltd. (SZSE: 000418) for CNY 1.68 billion. Plus the earlier 5.63% stake in Little Swan, Midea totally held a 29.64% stake in Little Swan then. In addition, Midea established its own washing machine division, to integrate the washing machine business of Midea, Little Swan, and Royastar.
On December 1, Midea announced that it wanted to buy more shares in Little Swan. But the deal has been delayed.
Therefore, Midea decided to turn to the 25% holdings of Royastar, which were exposed for auction on the Hefei Assets and Equity Exchange.
Midea’s continuous effort in the white goods market aims to diversify its product portfolio and disperse risks.