KKR to buy 10% stake in China’s Qingdao Haier Co

‘CONSUMER MIGRATION’::The move comes as China’s urbanization campaign may see hundreds of millions of migrant workers become residents, boosting demand


Wed, Oct 02, 2013 - Page 15

KKR & Co agreed to buy a 10 percent stake in appliance maker Qingdao Haier Co (青島海爾) for 3.38 billion yuan (US$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 is a 15 percent discount to the price on Sept. 12, the last day before Qingdao Haier suspended share trading pending an announcement.

KKR is making the investment as Chinese Premier Li Keqiang (李克強) drives an urbanization campaign that may see hundreds of millions of rural workers and their families become city residents, boosting consumption demand.

The private equity firm is stepping up deal-making in Asia after raising US$6 billion earlier this year for the industry’s largest investment pool in the region, researcher Preqin Ltd said.

China’s consumer industry “can expect to see more interest from foreign firms looking to take advantage of the sector as demand from China’s burgeoning middle-class increases,” Mitul Patel, manager for Asia research at Preqin, said via e-mail yesterday.

Operating income at Qingdao Haier has increased by more than 25 percent annually since 2008, according to data compiled by Bloomberg.

It is the Shanghai-listed arm of Haier Group (海爾集團), China’s largest appliance maker, which acquired New Zealand’s Fisher & Paykel Appliances Holdings Ltd last year to expand overseas and add manufacturing facilities around the world.

“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, healthcare and education industries.

The private equity firm run by Henry Kravis and George Roberts agreed on Sept. 27 to buy Panasonic Corp’s healthcare unit for about ¥165 billion (US$1.7 billion).

Success Dairy, a company part-owned by KKR, agreed on Sept. 24 to build dairy farms with China Modern Dairy Holdings Ltd (中國現代牧業), 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 US$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.