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October 22, 2009

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Midea to get shares in stake exchange

GUANGDONG Midea Holding Co yesterday said it plans to swap a 69.47-percent stake in a washing machine unit in exchange for shares in Wuxi Little Swan.
White goods giant Midea's consolidation of Little Swan has been in the focus when it acquired 24.01 percent of the firm in March last year. Midea pledged then to deal with their overlapping washing machine business before 2011 to improve business efficiency.
Midea will receive 83.4 million Little Swan shares at 8.63 yuan each, or 720 million yuan (US$106 million), and sell the stake in Hefei Royalstar Washing Machine Co to Little Swan, according to the statements of the two companies to the Shenzhen Stock Exchange. The deal is pending approval from the China Securities Regulatory Commission.
Midea's stake in Little Swan will be boosted to 39 percent from 29.63 percent now, according to China International Capital Corp.
"The integration of purchasing, logistics and R&D resources along with consolidation of product lines and distribution channels will significantly boost efficiency," said Fang Xin, a Guotai Jun'an Securities Co analyst. "It will lift the earnings capabilities for both parties."
Little Swan said the deal will strengthen its position in the washing machine market as it boasts full product lines covering customers in all segments with its "Little Swan," "Royalstar" and "Midea" brands. The company will occupy 21 percent of the washing machine market and be the second-largest after leader Haier, which has 32 percent share, according to Guotai Jun'an.
Midea said the deal will help it become the top 5 white goods maker globally by strengthening its washing machine position.
Earlier this year, Little Swan sold a 51-percent stake in a refrigerator unit to Midea for 39.76 million yuan.


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