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SCMP Reporter

Zhejiang Jiuli to focus on stainless-steel goods as US firm taps growing Asia market

Zhejiang Jiuli Group, the mainland's biggest manufacturer of fire-resistant cables, has sold the business to United States giant Tyco International, the company said yesterday.

Tyco is one of the world's biggest manufacturers of electrical and electronic components, undersea telecommunications cables, fire-protection equipment, medical devices, plastics and adhesives - though it is probably better known because its former chairman, Dennis Kozlowski, was accused of stealing about US$600 million from the company. It has operations in more than 100 countries.

Asia accounts for about 37 per cent of the global market for fire-resistant cables, worth US$80 billion a year and growing.

Meanwhile, the European and North American markets, which account for 30 per cent and 24 per cent respectively, are shrinking.

Global players such as Tyco are using the mainland as a manufacturing base for Asia.

A spokesman for privately owned Jiuli said it had sold 100 per cent of its fire-resistant cable company for 84 million yuan (HK$79.16 million), including its technology and brand, to Tyco because it was exiting the sector.

'We sold because we got a good price at a time when business was doing well,' he said.

'It was a strategic decision. We are giving up this product and will concentrate in the future on stainless-steel goods.'

Jiuli's cables account for about 60 per cent of the mainland market, with sales last year of 120 million yuan. Tyco's biggest rivals in the market are Pirelli of Italy, Nexans of France, AEI of Britain, Jiuli and another private company, Baosheng.

Early last year, according to industry sources, the six companies bid for a contract at the new international airport at Guangzhou. Tyco's bid was lower than Jiuli's but it lost, in part because it was little known in China.

From the second half of last year, the two companies discussed a joint venture and Jiuli's top managers were invited to visit Tyco facilities in Canada.

But the two sides could not agree on a price and Tyco decided to go ahead with a full acquisition instead.

Based in the small city of Huzhou, Jiuli is a typical example of a fast-growing private company in Zhejiang.

Set up in 1987 with 1.45 million yuan in capital, a year later it became the first private company on the mainland to produce fire-resistant cables.

By the late 1990s it had obtained a major share of the market, defeating inefficient and badly run state firms.

But Jiuli later decided the profit margin was too small.  French company Nexans entered China in the 1980s, setting up four joint ventures and wholly owned operations. Italian giant Pirelli entered the market in the 1990s, starting operations at a factory in Wuxi in 1996 and this year setting up a joint venture with Baosheng, involving an investment of 100 million yuan.

Last year, cables accounted for about 15 per cent of Jiuli's revenue of one billion yuan, a small proportion compared with its stainless-steel business, of which it is the largest producer in Zhejiang.

'We are already the third-biggest producer in China and aim by 2007 to become the fifth-largest in Asia,' the spokesman said.



Mainland group sells cable-making business to Tyco