KKR to buy a 10 percent stake in appliance maker Qingdao Haier for 3.38 billion yuan ($552 million)

KKR Buys Stake in China Appliance Maker for $552 Million

KKR & Co. (KKR) agreed to buy a 10 percent stake in appliance maker Qingdao Haier Co. for 3.38 billion yuan ($552 million), the New York-based private-equity firm’s biggest investment in China. The Shanghai-listed unit of China’s largest appliance maker is selling 299.5 million shares at 11.29 yuan each to KKR in a private placement, the company said in a statement posted to the Shanghai Stock Exchange yesterday. That’s a 15 percent discount to the price on Sept. 12, the last day before Qingdao Haier suspended share trading pending an announcement.KKR is stepping up deal-making in Asia after raising $6 billion earlier this year for the industry’s largest investment pool in the region, according to researcher Preqin Ltd. The firm, run by Henry Kravis and George Roberts, on Sept. 27 agreed to buy Panasonic Corp. (6752)’s health care unit for about 165 billion yen ($1.7 billion).

“The theme of consumer migration from low-income to middle class is certainly something we’re seeing” in emerging markets such as China and Brazil, Alex Navab, KKR’s co-head of private equity in the Americas, told a conference audience on Sept. 26. “Those industries that benefit from that migration are certainly industries that we look at,” Navab said, citing the consumer, health-care and education industries.

Dairy, Sauce

Success Dairy, a company part-owned by KKR, on Sept. 24 agreed to build dairy farms with China Modern Dairy Holdings Ltd. (1117), the nation’s largest raw-milk producer.

In January, KKR more than doubled its stake in a unit of Vietnamese food-sauce maker Masan Group Corp. to $359 million, marking its biggest investment in Southeast Asia. That deal was announced three months after KKR opened its seventh office in Asia with a Singapore team. Its other offices in the region are in Beijing, Hong Kong, Tokyo, Seoul, Mumbai and Sydney.

KKR has invested more than $5.5 billion in Asia since it opened its first office in the continent in 2005. The firm has more than 100 deal makers across Asia, it said in July.

The transaction with Qingdao Haier requires approval from China’s Ministry of Commerce and the China Securities Regulatory Commission, the company said in a statement. The Chinese company’s shares will resume trading on Oct. 8, it said in a separate statement. China’s stock market is closed for a week for a holiday.

To contact Bloomberg News staff for this story: Sarah Chen in Beijing at schen514@bloomberg.net; Devin Banerjee in New York at dbanerjee2@bloomberg.net

September 30, 2013, 7:28 a.m. ET

KKR Buys 10% Stake in Qingdao Haier

Deal Comes Days After Private-Equity Firm’s $1.7 Billion Panasonic Deal

ISABELLA STEGER

U.S. private-equity giant KKR KKR -1.48% & Co. is making its biggest ever bet on China, with an agreement to take a 10% stake in the listed arm of country’s biggest appliance maker.

KKR, which last week signed a deal to buy Japanese manufacturer PanasonicCorp.’s 6752.TO +1.37% health-care unit, agreed to pay around 3.4 billion yuan ($556 million) for the stake in Qingdao Haier Co., the Chinese company said in a filing to the Shanghai Stock Exchange on Monday, just days after the U.S. firm invested in a Chinese dairy venture.

If successful, it would be the buyout firm’s largest investment in China on record, eclipsing its joint $990 million investment with TPG Capital in China International Capital Corp. in 2010, according to Dealogic.

KKR is getting its stake in Qingdao Haier at a 15% discount to the Shanghai-listed company’s last traded price of 13.32 yuan on Sept. 12, when its shares were suspended from trading. The U.S.-headquartered private-equity firm will have one of Qingdao Haier’s nine board seats as part of the deal, according to the statement.

Qingdao Haier’s parent Haier Group ranks first in China and globally in terms of market share in the major appliances market, which includes refrigerators, washing machines and large cooking appliances, according to Euromonitor. Haier had 27.2% of the domestic market in China in 2012, compared with second-ranked GD Midea Holdings Co.’s 13.5% share. Globally, Haier Group and Whirlpool Corp. WHR -0.66%each have 9.6% of the market.

Although it leads by sales volume globally, Haier has repeatedly signaled its ambitions to build a global brand to compete alongside better-known and higher-end Western and Japanese names. Acquisitions have been a key part of that strategy.

Haier now owns most of appliance maker Fisher & Paykel Appliances Holdings Ltd. in a deal struck late last year valuing the New Zealand company at 927 million New Zealand dollars ($768 million), which would help the Chinese company sell products in developed markets at higher margins than in its domestic market. Haier had bought an initial 20% stake in the company four years ago.

In 2011, Haier Group bought Sanyo Electric Co.’s household appliances unit for about $130 million from Japan’s Panasonic Group.

But Haier is also remembered for some failed deals, such as a bid for Maytag Corp. in 2004 in partnership with Bain Capital and Blackstone Group. The U.S. appliance company was eventually sold to Whirlpool.

Haier later held talks with General Electric Co. in 2008 to buy its appliances unit but didn’t secure a deal.

In a statement, Qingdao Haier Vice Chairwoman Tan Lixia said the company would benefit from KKR’s international experience in mergers and acquisitions, and “help Haier to further grow its global platform.”

The deal is subject to regulatory approval.

KKR, which recently raised a $6 billion pan-Asia fund, is eager to put money to work in the region. Monday’s announcement comes days after KKR said it would invest $1.7 billion in Panasonic’s health-care unit for an 80% stake, its biggest-ever deal in Japan.

KKR last week also announced it would lead a $140 million joint venture with Chinese private-equity firm CDH Investments and China Modern Dairy Holdings Ltd.1117.HK +3.06% to build two dairy farms, an investment made from KKR’s China Growth Fund. KKR had earlier invested in China Modern Dairy.

While Haier is seeking to expand its footprint in the global arena, foreign firms are eyeing China’s appliance sector. In August, Whirlpool agreeed to buy a 51% stake in home-appliances maker Hefei Rongshida Sanyo Electric Co. 600983.SH +3.75% for about $552 million. The Chinese company mainly produces refrigerators, clothes washers and microwave ovens.

KKR’s peer The Carlyle Group CG -2.98% in 2011 invested roughly $197 million in Haier Group’s Hong Kong-listed unit Haier Electronics Group Co. 1169.HK -0.53% by purchasing convertible bonds and warrants, giving it an about 9% stake if other unspecified investments are taken into account.