08/08/11: Midea to Buy Latin American Assets, Accelerate Global Expansion
08/08/11: Home appliance giant Midea Holding Co. Ltd. (000527.SZ) has agreed to buy a 51% stake in Carrier Corp.’s air-conditioner assets in Latin America
as it looks to accelerate its global expansion plan.
Carrier Corp. is a subsidiary mainly responsible for managing United Technologies Corp.’s (UTC) air-conditioner businesses in more than 170 countries. Carrier’s revenues hit $11.4 billion last year, the best among its rivals.
Shunde, Guangdong-based Midea recorded air-conditioner sales of RMB 48.3 billion in 2010, accounting for 66% of its total sales, according to its official website.
Midea will pay about $223 million for the 51% stake via its wholly owned overseas subsidiary Midea Electrics Netherlands BV, the company said in a filing on Aug. 5.
Carrier will retain the remaining 49% stake in its Latin American assets, which include Brazil-based Springer Carrier Ltd. and Climazon Industrial Ltd.; Aro SA, Carrier SA and Carrier Fueguina SA in Argentina; and Carrier (Chile) SA.
Revenue generated by those companies totaled $621 million in 2010, and net profit was $34.8 million, according to the filing.
The deal has gained approval from Midea’s board of shareholders, but is still awaiting the go-ahead from the Department of Foreign Trade and Economic Cooperation of Guangdong and China’s National Development and Reform Commission.
Eight million air-conditioner units were sold in Latin American countries last year, including 4 million units in Brazil alone, Midea said, and the acquisition is aimed at paving the way for further global expansion in the future.
“I think the acquisition has a lot to do with avoiding costly tariffs that Brazil imposes on imported goods,” a person in charge of a Chinese home appliance enterprise’s overseas operations told China Business News.
“Any company hoping to seize market share in Brazil would have to either set up their own production bases or acquire local assets, and in the case of Midea, acquiring [Carrier’s Latin American assets] would not only help to avoid high tariffs but gain access to mature sales channels,” the person said.
Last October, Midea bought a 32.5% stake in Egypt’s Misr Refrigeration and Air Conditioning (Miraco) from UTC for $57.48 million, gaining access to Miraco’s products, brands and markets and boosting its presence in Egypt and Africa at large.
Midea said it viewed the Miraco stake sale as an opportunity to exploit the broader African market and surrounding markets in the Middle East and southern Europe.
Miraco is mainly engaged in the manufacture and distribution of air-conditioners in Egypt.
Midea, one of China’s best known electronics brands and a successful operator in mature overseas markets such as Europe and the U.S., has repeatedly voiced its ambition to expand into overseas markets after consolidating its home base in China.
Overseas sales hit RMB 20.58 billion last year, accounting for 27.6% of the company’s total sales in 2010.
Source: Business China
