Whirlpool Gets Chinese Officials' Nod for Hefei Sanyo Buy
Benton Harbor, MI-based Whirlpool Corp. (WHR) 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, the company has successfully cleared all the regulatory hurdles necessary to acquire this leading Chinese home appliances manufacturer.
The company is now looking forward to close the deal by the end of third quarter or early fourth quarter of 2014 after completing the final administrative processes and approvals. However, Whirlpool does not expect any significant impact on its earnings and cash flows in 2014 from this deal. The company expects 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 Aug 9, 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 aid Whirlpool’s long-term goal of expanding its footprint in China. Following the completion of this acquisition, Whirlpool plans to commit capital and technical resources in building Hefei Sanyo's research and development, and product innovation capabilities.
Further, the acquisition will prove beneficial to the Chinese consumers as they will have access to a wide variety of innovative and high-quality products from numerous brands at their disposal.
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 million in 2012.
Currently, Whirlpool’s reach in China is limited to the elite consumers. This acquisition will give Whirlpool a wide space to penetrate deeper into the Chinese market as Hefei Sanyo boasts a powerful nationwide distribution platform and a huge manufacturing existence with prospects for growth. Moreover, being one of the largest domestic players, Hefei Sanyo has superb research and development facilities as well as product innovation capacity. Its location in the appliance hub of Hefei is an added advantage.
Being one of the world’s largest home appliance manufacturers, Whirlpool is a leading name in the global market. Although the company appears to be mostly dependent on the North American region for its revenues, it has been enhancing its presence in the fast growing Latin American and Asian markets. We believe that the acquisition will support Whirlpool’s expansion in the Chinese market and in the South-East Asian region. The company is already one of the major players in the Indian market.
Whirlpool currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Libbey Inc. (LBY) with a Zacks Rank #2 (Buy). Other stocks performing well in the retail sector include Citi Trends Inc. (CTRN) and Abercrombie & Fitch Co. (ANF). While Citi Trends has a Zacks Rank #1 (Strong Buy), Abercrombie & Fitch carries a Zacks Rank #2.
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