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Whirlpool Enhances Presence in China

Zacks Equity Research

Benton Harbor, Mich.-based Whirlpool Corp. (WHR) recently announced that it has entered into a deal to acquire 51% stake in the leading Chinese home appliances manufacturer Hefei Rongshida Sanyo Electric Co. Ltd. According to Whirlpool, the deal is estimated to cost around $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 acquisition is subject to approval from Hefei Sanyo shareholders and the concerned Chinese regulatory authorities.

The deal will aid Whirlpool’s efforts to expand its footprint in China. The transaction is expected to culminate by the end of 2014 and will become accretive in the initial year of integration.

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 elite consumers alone. The recent 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. Though the company might appear 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 as well. We believe that the acquisition will aid 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 #2 (Buy). Other well performing stocks in the retail space include Jack in the Box Inc. (JACK), Green Mountain Coffee Roasters, Inc. (GMCR) and PCM, Inc. (PCMI). All of them carry a Zacks Rank #1 (Strong Buy).

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