Whirlpool of the US is in talks to buy a 30 per cent stake in a Chinese maker of fridges and washing machines from Panasonic of Japan, as it looks to gain a leg-up in China’s fast growing white-goods markets.
Hefei Rongshida Sanyo Electric, which is listed in Shanghai with a market value of Rmb5.3bn ($864m), would almost double Whirlpool’s share of China’s washing machine sales, though it remains some way behind market leaders Haier, Midea and Little Swan.
Whirlpool, based in Benton Harbor, Michigan, is determined to expand in emerging markets, especially Asia where it made just 5 per cent of its $18bn sales last year, up from 3 per cent in 2008. More than half of its sales are still in North America, but Latin America has grown to account for about a quarter.
Hefei Sanyo, which also makes fridges and microwave ovens, but with tiny share in those markets, is nearly 34 per cent held by Hefei State-Owned Assets Holding, an investment fund of the government of Anhui province, of which Hefei is the capital city.
The provincial government is very supportive of an agreement, according to people familiar with the talks, in part because Whirlpool is prepared to make Hefei the centre of its north Asian operations. It is currently based in Shanghai.
Once Whirlpool concluded a deal for Panasonic’s stake in Hefei Sanyo, it would first aim to take some or all of the local government’s stake and after then look to buy any more shares needed in the secondary market to give it complete control, according to one person.
The talks have been going on for several weeks already. After officers from Whirlpool made a number of visits to Hefei Sanyo’s facilities in April, rumours of the talks led to a sudden run-up in the Chinese company’s stock, according to one person with knowledge of the talks.
The shares lept almost 24 per cent in a fortnight and the company asked for them to be suspended on May 13.
Panasonic in China declined to comment on the talks, saying only that an announcement would be made in time, while the Hefei State-Owned Assets Holding also declined to comment. The secretary of the chairman of Hefei Sanyo said it was a matter for the shareholders.
Whirlpool declined to comment.
Hefei Sanyo, which was started as a joint venture between Sanyo and the local government in 1994, has the right to use the Sanyo brand until 2017, but has also been promoting its own high-end brands, Diqua and RoyalStar, in the past couple of years and wants further support to do that.
The company reported Rmb4bn in sales last year and almost Rmb350m in pre-tax profits, according to Bloomberg data.
Panasonic bought Sanyo in 2009 and has since sold a number of businesses, including selling all its non-Japan and China white-goods operations to Haier of China.
Additional reporting by Li Wan in Beijing, Ben McLannahan in Tokyo and Neil Munshi in Chicago