Galanz 2.4 Billion Shell? Holding "Hot Potato" Whirlpool

After a brief suspension of trading for two days, Galanz's offer to acquire whirlpool was announced as scheduled.

On the evening of August 25, whirlpool (600983. SH) issued an announcement to disclose the tender offer plan issued by Galanz. According to the announcement, 467527790 shares were purchased by tender offer, accounting for 61% of the total number of shares issued by whirlpool. The offer price was 5.23 yuan per share, and the maximum capital required was 2.445 billion yuan. If the acquisition goes well, Galanz will become the controlling shareholder of whirlpool China.

On the morning of August 26, Whirlpool's shares resumed trading. In the early trading, the trading limit was 6.96 yuan per share, with the latest total market value of 5.33 billion yuan.

Liang Zhenpeng, an economic observer of the household appliance industry, said in an interview with the 21st century economic report that the cost of holding whirlpool is not high for Galanz, whose annual revenue is 230 billion yuan.

Huipu's acquisition of Huipu can be carried out smoothly in the US market He said.

61% shares to be acquired

On August 23, whirlpool announced that the company received a written notice from Guangdong Galanz household appliance manufacturing Co., Ltd. on August 21, and was planning some tender offer matters. The purpose of this tender offer is not to terminate the listing status of the company, but may lead to the change of the control right of the listed company.

Whirlpool shares have been suspended from early trading on August 24. Two days later, whirlpool announced again and disclosed the specific tender offer plan. According to the plan, Galanz plans to purchase 61% of whirlpool shares at a price of up to 2.445 billion yuan.

It is understood that the scope of this acquisition is the tradable shares held by all shareholders of whirlpool, among which whirlpool (China) Investment Co., Ltd., the current largest shareholder, holds 51% of whirlpool shares. Hefei state owned assets Holding Co., Ltd. holds 23.34% shares of whirlpool, which is the second largest shareholder.

However, the reporter noted that as of June 30, this year, about 234 million shares held by whirlpool investment were subject to restrictions on sales, and the lock period ended on October 23, 2017, but as of August 25, this year, the procedures for lifting the ban have not been handled.

Galanz said in the tender offer report that "the purpose of this tender offer is not to terminate the listing status of whirlpool. If the equity distribution of whirlpool does not meet the listing conditions after the completion of the tender offer, the purchaser, as the controlling shareholder of whirlpool, will coordinate with other shareholders to put forward and implement a solution to the equity distribution problem, so as to maintain Whirlpool's listing status 。”

But at the same time, Galanz also pointed out that the tender offer is uncertain. "If, after the completion of the tender offer, the purchaser holds no less than 51% of the shares of the listed company, he will become the controlling shareholder of the listed company, and the actual controller of the listed company will be changed to Liang Zhaoxian and Liang Huiqiang. If the number of pre accepted shares is less than 51% of the total number of shares of the listed company, this tender offer acquisition will not take effect from the beginning, all the pre accepted shares will not be accepted by the purchaser, and the controlling shareholders and actual controllers of the listed company will not be changed. "

As for the purpose of the tender offer, Galanz said that based on its confidence in the future development of whirlpool, and optimistic about the synergy effect between the listed company and its own industry, Galanz plans to obtain the control right of the listed company through this tender offer. According to the announcement, within 12 months after the completion of the tender offer, Galanz has no plan to increase or dispose of whirlpool shares, and there is no clear or detailed plan to change Whirlpool's main business or make major adjustments to Whirlpool's main business.

After the initial announcement of Huipu's foreign investment, he said that he would not be responsible for the long-term investment in China

Hot potato

According to the data, Whirlpool's predecessor in China was Hefei Sanyo, a listed company. In 2014, whirlpool acquired 51% shares of Hefei Rongshida Sanyo Electric Co., Ltd., and Hefei Sanyo changed its name to whirlpool (China) Co., Ltd.

It is reported that at that time, Hefei Sanyo, which was taken over by whirlpool of the United States, was already a hot potato. Not only did the state-owned assets of Hefei have a share in Hefei, but some of the overseas rights and interests of its Sanyo brand have been sold to Haier, and the ice washing of the Rongshida brand was once handed over to the operation of the United States. In addition, the listed companies and the trademark licensors of Rongshida small household appliances also have disputes. As a result, most people in the industry are not optimistic about the deal.

For many years, Sanyo has failed to create a sales channel for Huipu in the United States. In addition, Hefei Sanyo's local manufacturing base in Hefei is also one of the important assets considered by the US side.

However, the two sides did not achieve the "1 + 1 greater than 2" effect expected in the original plan. Due to the cultural differences between China and the United States, different strategies and other factors, including Jin Youhua and Zhang Rongzhong, the former Sanyo executives in Hefei have left one after another, and whirlpool China's top executives have ushered in a great change of blood. In recent years, Whirlpool's performance in China has continued to decline. From 2017 to 2019, the revenue of whirlpool China was 6.364 billion yuan, 6.286 billion yuan and 5.282 billion yuan respectively.

In the first half of this year, whirlpool China realized operating revenue of 2.156 billion yuan, a decrease of 20% compared with the same period of last year; the net profit attributable to shareholders of listed companies was - 116 million yuan, down 93% compared with the same period of last year; the net profit after deducting non recurring profit and loss attributable to shareholders of listed company was - 130 million yuan, down 44% compared with the same period of last year. Although the net profit narrowed sharply from 107 million yuan in the first quarter to 09 million yuan in the second quarter, it was still unable to reverse the situation of loss and the downward trend of performance.

In addition to poor performance, whirlpool China also faces administrative penalties. On August 1, this year, whirlpool announced that the company received the decision on administrative punishment issued by Anhui regulatory bureau of China Securities Regulatory Commission on July 31. It was found that whirlpool was suspected of preparing false sales orders, understating sales discounts and operating costs, delaying the recognition of sales expenses and revenue cross period recognition, which affected the business income and profit data of 2015 and 2016 。

In this regard, Liang Zhenpeng believes that whirlpool has made serious strategic mistakes in the Chinese market. It is reported that as early as more than 10 years ago, whirlpool outsourced all its air conditioning business, water heater business and some small household appliances business to Suning e-buy.

Suning e-buy, as a retailer, can only produce on behalf of the factory. It has no advantage in manufacturing, which leads to a sharp decline in product quality. It is often detected as unqualified by the market supervision and Administration Bureau, which ultimately overdrafts Whirlpool's brand reputation. In addition, whirlpool in the United States originally positioned whirlpool as a medium and high-end brand, but Suning E-mart, a retailer, fought a price war, making the price of its mid and high-end products lower than that of domestic brands.

"From the day when whirlpool authorized a considerable part of its brands to Suning e-buy, it was doomed that American whirlpool would face complete failure in the Chinese market." Liang Zhenpeng said frankly.

According to Euromonitor information consulting data of the UK, Whirlpool's global market share of washing machines in 2018 ranked second in the world, second only to Haier. But in the domestic market, whirlpool washing machines can only be ranked in the second echelon. According to Ovi cloud, in the first half of this year, Haier, cygnet and Siemens were firmly established in the offline market of domestic washing machines, while Panasonic, Midea and whirlpool became the second stable camp.

At present, whirlpool China still has certain advantages in refrigerators, washing machines and other categories. In recent years, whirlpool has gradually increased its distribution in kitchen electricity business. The core business of Galanz is kitchen electricity, but its white appliance business has not opened up and its market share is low. Therefore, whirlpool has certain attraction for Galanz. Liang Zhenpeng predicted that after the acquisition of whirlpool, Galanz will continue to expand its washing machine business, which accounts for more than half of Whirlpool's turnover.

Galanz wants to be listed on the back door?

As the second largest appliance group in Foshan after Midea, Galanz has not been listed for many years, and its IPO process has always been the focus of attention. Due to the lack of listing financing to promote the leapfrog development of the enterprise, the business development speed of Galanz is relatively slow.

According to the data, the revenue of Galanz in 2017 was 20.092 billion yuan, and that in 2018 was 21.244 billion yuan. In the same period, Midea Group's revenue was 241.919 billion yuan and 261.82 billion yuan respectively, with a total market value of over 500 billion yuan.

Over the years, Galanz has impressed the outside world as a "price butcher". With the help of price war, Galanz has lowered the price of microwave oven to 199 yuan and 299 yuan. Although he has become the number one in the microwave oven market, he has not made much money.

In recent years, Galanz, as a leading brand in the microwave oven industry, has also accelerated the pace of diversification, and successively entered the refrigerator, washing machine, water heater, kitchen electricity and other industries. If the acquisition goes smoothly, the two sides may be able to realize the complementarity between the main business categories.

This series of changes is closely related to the new generation of Galanz management team. At the end of March last year, Liang Huiqiang, who was born after 1995, appeared at the Galanz annual meeting as vice chairman of Galanz Group for the first time. Like his father, Liang Zhaoxian, after entering Galanz, Liang Huiqiang was also responsible for overseas market business and promoting the company's digital transformation.

What changes the young successor will bring to Galanz in the future has attracted public attention.

Soon after, Galanz officially announced its technological transformation and entered the fields of chip, edge computing and wireless power. At the beginning of this year, Galanz announced that it would invest more than 10 billion yuan in projects such as open source chip and industrial 4.0 base. Liang Zhaoxian, the chairman and President of Galanz Group, more ambitiously proposed to "rebuild a Galanz" in 2020.

As a matter of fact, as early as last year, Liang Zhaoxian said to the outside world that Galanz would move towards the goal of the world's top 500 enterprises and achieve an annual revenue of more than 100 billion yuan in the next three to five years. M & A is clearly the only way to expand the plate rapidly.

Liang Zhenpeng believes that if the acquisition is completed, Galanz is equivalent to backdoor listing. After that, the group business can be packaged and injected into Whirlpool's shell, so as to realize the overall listing of Glanz group. In addition, it can also obtain Whirlpool's high-quality refrigerator washing machine production line, make up for its shortcomings in the field of white household appliances, and accelerate the development of its own business.

If the acquisition is completed, Galanz is equivalent to backdoor listing. After that, the group business can be packaged into the shell of whirlpool to realize the overall listing of Glanz group. Photo by Gan Jun

But he also said that there are still many problems to be solved after Galanz took over whirlpool. For example, the scale of Huipu's large-scale production line can be adjusted smoothly. In addition, if the cooperation with Suning e-buy is suspended, how much compensation is needed, and so on, these are the problems that Glanz needs to face after taking over. "