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December 2, 2009

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Haier subsidiaries join forces

SHANGHAI-LISTED Qingdao Haier Co is in talks to increase its stake in Hong Kong-listed Haier Electronics Group Co to 51.31 percent from 19.38 percent, according to a filing yesterday to Shanghai's stock exchange.

The deal between the two subsidiaries under Haier Group represents the parent's determination to consolidate its business and to make Qingdao Haier a main platform for its international business development, analysts said. Qingdao Haier hasn't signed any agreement on the purchase of the stake from its parent company and the deal is subject to approval from shareholders of both companies and the securities regulatory, according to statements by Qingdao Haier and Haier Electronics.

"Qingdao Haier, which mainly produces refrigerators and air-conditioners, will gain washing machines and water heaters assets from Haier Electronics through the deal. Thus Qingdao Haier is expected to become the most profitable unit of Haier Group with these strong white goods assets," said Zhu Lijun, a Galaxy Securities Co analyst.

Haier Group spokesman Sun Kunpeng said: "It is an important step on the way to consolidate the group's white business. It will enhance Qingdao Haier's leading position in the industry and strengthen its capability to explore the overseas market."

Zhu said there are two possibilities for the consolidation. One is that Qingdao Haier will buy the 31.93 percent stake with cash as it had a 6.5 billion yuan (US$952 million) cash flow by the end of the third quarter. Under the other scheme, Qingdao Haier can get the stake via a private placement with its parent. Zhu said the second one is more viable.

Qingdao Haier bought the 19.38 percent stake in Haier Electronics in July 2008 from Deutsch Bank for HK$775.54 million (US$100 million).


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