China's Haier sounds out takeover of NZ's F&P Appliances

WELLINGTON/HONG KONG Mon Sep 10, 2012 3:14am EDT

Household appliances await delivery outside a department store in Shanghai September 28, 2002. REUTERS/Claro Cortes IV

Household appliances await delivery outside a department store in Shanghai September 28, 2002.

Credit: Reuters/Claro Cortes IV

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WELLINGTON/HONG KONG (Reuters) - China's Haier Group, parent of Carlyle-backed Haier Electronics (1169.HK), is looking at a takeover of New Zealand's Fisher and Paykel Appliances Ltd FPA.NZ, in a deal that could value the dishwasher and washing machine maker at some $600 million.

The move would beef up Haier's technology and reduce its reliance on a slowing China economy, while news of the approach sent shares in New Zealand's largest appliance maker soaring, at one point as much as 40 percent to a 3-1/2 year high.

Haier, which already owns 20 percent of the company, has approached three other shareholders about possibly buying their stakes, F&P's directors said in a statement.

They added that Haier would pay a premium if an offer were to be made although they did not reveal the price the Chinese company had indicated.

The news comes as China's home appliance makers are grappling not only with reduced demand but also intensifying competition from local and foreign brands that have hurt their bottom lines and prompted them to seek new avenues to spur growth.

"It's a smart move to eye overseas expansion so as to reduce reliance on slower demand in the domestic market," said Linus Yip, chief strategist at First Shanghai Securities.

Brian Gaynor, director of Milford Asset Management, said Haier, one of the world's largest appliance makers, would have to offer more than NZ$1.00 per share to show it was serious about a takeover.

"Whether the takeover goes through will depend on the price. It will have to be north of NZ$1.10, NZ$1.15," he said.

F&P's shares were last trading 29 percent higher at NZ$0.97, valuing the company at around $600 million. The stock rose as high as NZ$1.05 on Monday.

The three shareholders Haier approached are Australia's Allan Gray, formerly called Orbis Investment Mangement, which owns around 17 percent, AMP Capital Investors which holds about 5 percent, and the state-owned Accident Compensation Corp has about 8 percent.

Simon Marais, managing director of Allan Gray, said the company had been in talks with Haier but declined to give details. AMP and Accident Compensation Corp declined to comment.

Officials from Haier Group or its units, Hong Kong-listed Haier Electronics and Qingdao Haier Co Ltd (600690.SS), were not immediately available for comment. Haier Electronics' Hong Kong-listed shares were flat.

A GOOD FIT

F&P, known for its double-door dishwashers, had been hit by the global credit crisis as slower demand was aggravated by a high New Zealand dollar, but analysts said the company had turned a corner in the past year and has a solid outlook.

"Fisher and Paykel would be an ideal company for (Haier) to stitch on to their existing operations and use their technology," said Gaynor.

Although some Chinese firms have had difficulties buying into overseas assets, there have been precedents set in New Zealand, with Bright Dairy (600597.SS) owning 51 percent of dairy producer Synlait and a takeover approach from Haier was not expected to ruffle feathers.

"Haier have been on the register for quite some time. If there was any issue, I'm sure it would have been borne out a long time before now. I would say there would be no issue whatsoever," said David Price, head of institutional broking at Forsyth Barr.

Outbound China deals so far this year amount to $42.6 billion, down from $57.7 billion in the same period a year earlier, according to Thomson Reuters data.

Haier Group bought a 20 percent stake in F&P in 2009, giving it exclusive rights to sell F&P products in China. Two years later, Carlyle Group agreed to buy 9 percent of Haier's Hong Kong-listed unit, investing up to $194 million through convertible bonds.

Carlyle's investment provided capital for Haier's expansion plans, and emerged just days after Haier decided to buy Panasonic Corp's (6752.T) Sanyo Electric washing machine and refrigerator units in Japan and Southeast Asia for $130 million.

Last month, F&P announced a surge in net profits for the first four months of the year and said it would resume dividend payments this year.

It expects full year operations earnings of NZ$70 million-NZ$78 million before taxes for the current year.

F&P has moved most of its manufacturing to low cost Mexico and Thailand. It also has a consumer finance business. ($1 = 1.2337 New Zealand dollars)

(Additional reporting by Stephen Aldred and Denny Thomas; Editing by Anne Marie Roantree and Edwina Gibbs)

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