Whirlpool Corp said it will buy a majority stake in China’s Hefei Rongshida Sanyo Electric for US$552 million as the world’s largest maker of home appliances seeks to expand its sales in Asia. Hefei Sanyo, which makes washers, microwaves and refrigerators sold under the Sanyo, Rongshida/Royal Star and Diqua brand names, employs 10,000 workers at three manufacturing facilities in China. Last year, the company, which competes with larger Chinese companies such as Haier Electronics Group Co Ltd and GD Midea Holding, reported a net profit of US$48 million on sales of US$636 million. The deal represents the first big purchase of a Chinese company by a blue-chip US buyer since Caterpillar Inc bought ERA Mining, a maker of underground mining equipment, last year. Caterpillar later discovered an ERA subsidiary had engaged in accounting misconduct that inflated ERA Mining’s value. Although Caterpillar was able to significantly reduce its purchase price, the Peoria, Illinois-based company was forced to take a US$580 million charge as a result of the deal, and some analysts feared the fiasco would put a chill on foreign purchases of Chinese companies. Whirlpool’s purchase of Hefei Sanyo will help the US company boost its business in Asia, which contributed just 5 per cent of its total sales of US$4.7 billion the second quarter. Hefei Sanyo was set up in 1994 as a joint venture between Japan’s Sanyo Electric, now a unit of Panasonic, and Hefei State-Owned Assets Holding Company, the investment arm of the local state government. “Whirlpool has a strong presence in China’s higher tier segments, this acquisition allows the company to build on, complement, and grow its position in the emerging Chinese market,” Chief Executive Jeff Fettig said in a statement. Whirlpool said its China unit would initially buy Sanyo’s 29.51 per cent stake in the company through a share purchase deal. It will then acquire the remaining shares through a private placement. Whirlpool China will have to pay a break-up fee of US$20 million if it fails to close the transaction.
