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Leading television maker Sichuan Changhong Electric Co yesterday said it has agreed to buy a controlling stake in smaller home appliance maker Hefei Meiling Co.
The acquisition, which will help Changhong move into the refrigerator-making business, underlines the firm's growing desire to extend its reach in the white-goods or home appliance business amid an industry consolidation.
Under the deal, Guangdong Greencool Enterprise Development Co, which controls Anhui-based Meiling, will transfer a 20.3 percent stake in Shenzhen-listed Meiling, to Changhong.
The share-transfer, which could be worth as much as 145 million yuan (US$18.12 million), will see Greencool completely retreat from Meiling.
Greencool is the largest shareholder of both Meiling and Guangdong Kelon Electrical Holdings, and has been hit by numerous scandals in the past few months.
Former Kelon Chairman Gu Chujun was arrested in September and is currently under investigation as securities watchdogs suspected him of overstating the firm's profits.
In September, Gu sold a 26.43 percent stake in Kelon to home appliance maker Hisense's refrigerator unit for 900 million yuan (US$112.5 million).
Industry observers said Changhong had also intended to buy Kelon but failed.
Meiling has an annual manufacturing capacity of 1.5-2 million refrigerator units.
While Kolon can produce 8 million units, according to its website.
Changhong was not available for comment yesterday.
The acquisition of Meiling is a positive step for Changhong's intensifying drive to diversify its business amid a slowing in the television-making industry, said Wang Guoping, an analyst with China Galaxy Securities.
"There is a heightened need for Changhong to transform itself by extending its scope beyond the TV business," Wang said.
"Compared to its chief rivals, Changhong has yet to establish a leading position in the market for the flat panel TVs."
Recently Changhong has preliminarily secured licences from the regulators to make and sell mobile phones.
Shanghai-listed Changhong recorded a net profit of 260 million yuan (US$32.5 million) during the January-September period.
It has generated 6.32 billion yuan (US$790 million) from the TV business.
Its revenues from IT-related products in the period amounted to 1.4 billion yuan (US$175 million), compared to less than 100 million yuan (US$12.5 million) at the end of last year.
(China Daily November 11, 2005)
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