Fri, Jan 10, 2003 - Page 10 News List

Sampo purchases control of Grundig

ACQUISITIONS The home-appliance giant is stepping into the European market by buying control of a recognized brand name. But a mountain of debt is also included


Sampo Corp's (聲寶) purchase of a controlling stake in German home electronics giant Grundig AG on Wednesday will enable the Taiwanese firm to make a giant branding-leap forward in Europe, market analysts said yesterday.

"By way of the deal, Sampo can immediately start profiting in Europe, bypassing the brand building and distribution-network hurdles," said Kung Ming-hsing (龔明鑫), a director at the Taiwan Institute of Economic Research.

Kung made the remarks after Sampo, one of Taiwan's largest home-appliance makers, announced yesterday that it has bought Grundig for an undisclosed sum.

"Sampo inked the Share Purchasing Agreement with Grundig in Munich on Wednesday," said Wu Chin-fang (吳錦芳), a spokesperson with Sampo.

Grundig, the Nuremberg-based maker of TVs, stereos and video cameras, came close to filing for bankruptcy last year when creditor banks refused to extend credit until Sampo registered its interest.

Sampo Corp paid at least 100 million euros (US$105 million) for 95 percent of the German company, Financial Times Deutschland reported, citing people familiar with the situation.

The Taiwanese company's purchase price comprises half of Grundig's pension costs of 200 million euros, the newspaper reported.

Wu refused to comment on the report, saying the company will disclose details of the deal on Tuesday.

Sampo shares rose almost to the daily limit of 7 percent, ending 6.8 percent higher to close at NT$14.1 on the TAIEX yesterday.

According to Wu, Sampo will soon begin selling its plasma display TVs, refrigerators and washing machines under the Grundig brand name in Europe via the 56-year old company's 29,000-outlet distribution network.

Another industry observers also praised the move.

"When entering a new market, branding and distribution are difficult barriers, especially in Europe where consumer behavior is quite different from Asia," said Chen Yen-liang (陳彥良), an analyst at Yuanta Core Pacific Securities Co (元大京華證券) in Taipei.

The branding shortcut allows Sampo to enter not only Europe but also the global market, Chen said.

"Market expansion is important for Sampo's survival, since the domestic market is limited and competition continues to grow after Taiwan's WTO entry," he said.

The deal also involves some risk, the researcher said.

"Most merger cases have to take the corporate culture into consideration," Kung said.

Human resource and customer-service-management concepts across different cultures can create difficulties, he said.

A failure to bridge that gap may send Grundig employees packing, Kung said.

In addition, Sampo may also have to take on Grundig's financial burden.

"Since Sampo is purchasing a nearly bankrupt company, the financial burden may be heavy," Chen said.

The new entity is not expected to be running smoothly until 2005, he said.

According to Sampo CEO Ho Heng-chun (何恆春), the company expects to boost Grundig sales to US$2 billion (NT$72 billion) within the next three to four years, up from US$1.3 billion (NT$45 billion) in sales last year.

Ho said that by combining Grundig's research-and-development skills and Sampo's manufacturing ability in Taiwan and China, the alliance may bring Sampo onto the world stage.

China has become Sampo's priority market, not only in terms of manufacturing but also for market access. Sampo aims to move nearly 80 percent of its manufacturing to China by the end of next year. The company has already established production bases in Suzhou, Kunshan, Dongguan and Tianjin.

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