China's Haier plays waiting game for GE unit
SHANGHAI (Reuters) - Haier, China's largest home appliance maker, plans not to bid for General Electric Co's (GE.N) appliances unit until it sees clear signs of a U.S. market recovery, said people with direct knowledge of the matter.
A bid for GE's appliances business, which the U.S. giant put on the block in May, could be Haier's last opportunity to buy a household U.S. brand, part of its ambitions to reach global consumers rather than just Chinese.
With sales of $7.2 billion last year, the unit is worth an estimated $4 billion to $8 billion, analysts have said.
However, after Haier hired McKinsey & Co in August to evaluate a possible GE deal, officials including Chief Executive Zhang Ruimin made their minds clear to wait and not bid yet, said the sources, who declined to be named given the sensitivity of the matter.
"We're certainly interested in the GE assets but we just can't see any clear sign of when the U.S. markets, in particular its real estate market, can recover," said one of the sources, a senior Haier executive.
"And we don't know where the bottom is. I guess nobody can really tell," he added.
In a McKinsey report submitted to top management in August, the consultants suggested Haier should bid for the GE appliance business for several reasons, including the potential of the U.S. consumer market, the sources said.
But Haier managers decided the sharp downturn in U.S. property sales and consumer confidence would batter the market for GE's big-ticket home appliances.
A Haier spokesman declined to comment.
In May, GE's CEO Jeff Immelt named companies including Haier, South Korea's LG Electronics (066570.KS) and Turkey's Arcelik (ARCLK.IS) as possible bidders for the second-largest U.S. appliance maker after Whirlpool Corp (WHR.N).
No formal bids have been announced yet, and the plans of the other possible bidders could not be immediately ascertained.
PROPERTY MARKET FEARS
Fred Crawford, Chief Executive of AlixPartners, a New York-based corporate turnaround firm, suggested Asian companies such as Haier should sit on their hands for at least six months to get cheaper deals.
"This will be a wonderful opportunity to bring the (Haier) brand to shops in America as it already has begun to do so quite successfully from what I can see," he said.
"My advice in the short term is to be patient, because the buying opportunities in six months will be better than they are now in terms of valuation."
Haier is not the only would-be buyer biding its time.
Samsung Electronics (005930.KS), the world's No.1 memory chip maker, said on Wednesday it was dropping its bid for SanDisk (SNDK.O) due to the U.S. firm's poor earnings and uncertain outlook.
A source who worked with Haier executives to evaluate the potential GE deal said the other concern for Haier is how to pay for it, as Haier would rather not borrow from commercial banks.
Haier Group is unlisted, but controls two listed arms -- Shanghai-listed Qingdao Haier Refrigerator Co (600690.SS) and Hong Kong-listed Haier Electronics Group Co (1169.HK).
The most likely option to finance a bid is to team up with private equity investors such as Bain Capital or Blackstone Group (BX.N), although agreement on terms and conditions for a joint bid may be difficult in the short term, the sources said.
State-controlled Haier also sought informal advice from China's Ministry of Commerce, which replied that it should make the decision to bid or not at its own risk, the sources said.
"I think we did good homework and now we just want to wait and see," said the Haier source.
(Additional reporting by Samuel Shen in Shanghai and Michael Flaherty in Hong Kong; Editing by Tony Munroe and Mathew Veedon;)
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