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By Wang Lan (China Daily)
Updated: 2008-02-29 09:41

Home appliance maker Midea yesterday said it will buy a 24.01 percent stake in Little Swan for 1.68 billion yuan ($235.9 million) from Wuxi Guolian Development Group.

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The deal will make Midea the biggest shareholder in Little Swan, which is the second largest washing machine producer by sales in China after Haier.

The Wuxi Guolian stake in Little Swan is valued at about 1.9 billion yuan at a closing price of 21.9 yuan on January 14, when Little Swan's shares were suspended for trading. Wuxi Guolian had put its entire holding of 87.6 million Little Swan shares up for sale.

Little Swan said yesterday in a statement to the Shenzhen Stock Exchange the equity transfer was still pending approval from the State-owned Assets Supervision and Administration Commission.

Before the deal was signed, Sichuan-based Changhong Group, China's leading electrical appliance maker, and Italian MTS Group, a world leading company providing water heating systems and services, also made a bid for the equity purchase.

Analysts said other appliance manufacturers were interested in Little Swan's established stable and broad customer base and sales network. "By obtaining a controlling stake in Little Swan, Midea has gained an added advantage in strengthening its competitive edge and consolidating its leading position in the home appliance industry," said Zhang Xiaoga, an analyst at Orient Securities in Shanghai.

Wuxi-based Little Swan, targeting the high-end market by concentrating on the more expensive line of tumbling-box washing machines, will help enrich the current product range of Midea, whose main product is two-track washing machines.

Analysts agreed the industry trend is to increase market share through mergers and acquisitions.

"Mergers and acquisitions in the home appliance industry, though not as much as in other industries in China, will help restructure the whole industry and optimize capital resources," said Shi Hong, an analyst at Industrial Securities in Shanghai.

Other than newly acquired Little Swan and its own washing machine brand, Midea also manufactures washing machines under the brand name of Royalstar through a joint venture.