Changhong Electric passes on Little Swan
Sichuan Changhong Electric, one of the mainland's largest television makers, has passed on the chance to buy a 24.01 per cent stake in washing-machine maker Wuxi Little Swan, saying that the price is too high.
Italy-based Indesit, the No2 producer of home appliances in Europe, and Guangdong-based Midea Electric Appliances, a top mainland electrical appliance maker, have also been invited to bid but have not indicated whether they will submit formal proposals.
'Although we are interested [in developing our] washing-machine business and also have the financial resources to join the bid, we have decided to temporarily give up submitting a bidding proposal after considering the cost and risk of the acquisition of the Little Swan stake,' Changhong said in a statement filed with the Shanghai Stock Exchange at the weekend. 'The bidding price for Little Swan's stake is too high.'
On February 4, Wuxi Guolian Development Group, the owner of Little Swan, invited Changhong, Indesit and Midea to submit bidding proposals.
Wuxi Guolian set a minimum price for its 87.7 million Little Swan shares - a 24.01 per cent stake - of at least 1.65 billion yuan in cash, equivalent to 18.87 yuan per share.
Trading in Little Swan shares has been suspended since January 11, when they closed at 21.09 yuan, up about 300 per cent from a year earlier, giving the company a market value of about eight billion yuan.
Mainland electronics makers are moving into appliances through acquisitions as competition from Sony Corp of Japan and rivals cut the profit margins of their television businesses, according to industry experts.
Last year, Changhong agreed a number of deals to broaden its product mix. In June, it sold a 0.8 per cent stake to Microsoft Corp, the world's biggest software maker, to strengthen ties for the joint development of internet-enabled television.
In August, it bought 82.9 million shares or a 20 per cent stake in air-conditioner and refrigerator maker Hefei Meiling Group for 175.6 million yuan. Last month, it said it bought a 29.92 per cent stake in Shenzhen-listed Huayi Compressor, which makes compressors for air conditioners and refrigerators, for 234 million yuan.
Changhong's profit jumped 50 per cent in the first half of last year to 192.7 million yuan. Sales rose 30 per cent to 10.6 billion yuan on growth in flat-panel televisions. Shares in Sichuan Changhong fell 2 per cent to 9.39 yuan on Friday last week.
Trading of Midea's shares will be suspended today for a board meeting.
Bidding price
Wuxi Guolian is selling a 24.01 per cent stake in Little Swan
The minimum price in yuan is: 1.65b yuan
