Haier Group Corp, China's largest maker of refrigerators and air conditioners, is looking at General Electric Co's appliance arm and other “opportunities” as it seeks acquisitions overseas.
“Haier will make an assessment on the possibility” of acquiring the GE division, Zhang Tieyan, chief executive officer for Asia outside of China, said in a phone interview today. “Haier is open to any such opportunity.”
GE Chief Executive Officer Jeffrey Immelt in May identified Haier and Korea's LG Electronics Inc. as potential suitors for its appliance unit. A purchase of the century-old division would give Haier, which sells products through Wal-Mart Stores Inc, Best Buy Co and Home Depot Inc, a household name to help its US expansion.
“It's cheap to buy it now when the US economy is in a downturn,” Castor Pang, strategist at Sun Hung Kai Securities, said by phone. “General Electric's brand is very good and will help raise the company's profile and help it to break into the high-end market.”
Haier, based in Qingdao, “is focusing more and more on overseas markets” where sales rose 25.8 per cent in 2007, more than a 16.5 per cent increase in group sales, Zhang said. The group had total sales of $15.2 billion last year, she added.
Up to $8 Billion: The GE unit, the biggest provider of refrigerators, ovens and dishwashers for newly built US homes, may fetch $3 billion to $8 billion, according to estimates from Citigroup Inc and Goldman Sachs Group Inc.
Haier Group, the unlisted parent of Hong Kong-listed Haier Electronics Group Co and Shanghai-listed Qingdao Haier Co, pulled out of a bid for US appliance maker Maytag Corp. in 2005. Whirlpool Corp. bought Maytag in 2006 to create the world's biggest appliance maker.
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Haier “has a business relationship with General Electric” and it's “always seeking such kinds of possibilities and opportunities” to expand, Zhang said in a Bloomberg TV interview.
“Acquisitions can be an effective way for expanding the business in the domestic market and also in the world market.”
The Chinese home-appliance market, of which Haier has about a 15-30 per cent share, is mature and fiercely competitive, pushing the company to seek sustainable growth outside of China, the 35-year-old said.
“To be number one in China doesn't mean we can keep the growth continuously,” she said. “We have to go to overseas markets and make achievements there.”
US Sales Growth:Haier said sales growth in the US, its biggest overseas market, will remain stable at 20 per cent this year, and revenue from India and Pakistan will gain about 45 per cent, Zhang said.
Sun Hung Kai Securities's Pang said Haier “won't immediately make a deal yet because they are watching if US consumer spending will slow further so they can get a better deal.”
Qingdao Haier in May said it isn't involved in plans to acquire the GE unit. LG Electronics's Chief Financial Officer David Jung at last week said “there is nothing going on at LG with regard to the GE appliance sale.”
Haier has reacted to rising raw material and labor prices by cutting costs through standardising design and by raising retail prices, Zhang said. She didn't say how much savings the group has generated.