Midea to inject motor business into Hualing
Midea Group, a top electrical appliance maker on the mainland, will restructure its business by injecting an upstream household appliance motor business valued at HK$4.5 billion into its Hong Kong-listed unit Hualing Holdings, in its latest attempt to return the unit to profitability.
Hualing, which has been in the red for the past five years, announced yesterday that it would buy the upstream motor business from Midea, its largest shareholder, by disposing of its interest in nine subsidiaries and transferring certain debt receivables and issuing new shares at 41.4 HK cents each.
After the transaction, Midea will increase its stake in Hualing to 74.97 per cent from 28.62 per cent.
Midea intends to sell three out of Hualing's nine subsidiaries, engaged in making air-conditioners and refrigerators, to its 46.74 per cent-owned Shenzhen-listed Guangdong Midea Electric Appliances to consolidate its electrical household appliance businesses under one group.
'The transactions will enable us to migrate upstream the household appliance chain, which we expect to offer strong growth potential,' chairman Fang Hongbo said.
Welling Group, Midea's motor unit, has a 20 per cent share in the global washing machine motors market and a 30 per cent share in the country's air-conditioner motors market.
Hualing's acquisition cost equals 25 times Welling's earnings of 175 million yuan last year.
In the first half, its profit jumped 122 per cent from a year earlier to 171 million yuan.
With the transfer of HK$876 million worth of debt receivables, for which full provision had been made, Hualing would be able to reduce its accumulated losses and enhance its ability to distribute dividends, Mr Fang said.
Hualing will change its name to Welling Holding to signify the new business focus.
Just before suspension last Thursday, the company's shares closed at 71 HK cents.
