F&P Appliances shares jump on Haier takeover move
UPDATE: Haier's takeover offer for Fisher & Paykel Appliances is expected this week.
The listed company announced to the stock exchange this morning the Chinese manufacturer, a 20% shareholder, has indicated it may offer to buy the whole company and has approached three other major investors.
F&P Appliances shares [NZX:FPA] jumped 40% in early trading this morning, to a four-year high of $1.30.
By 1pm they had eased to 95 cents - still up by more than 25% - on trading of 2.1 million shares, worth $2 million.
The rise has increased F&P Appliances' market value from $543 million to $688 million.
Two of F&P's biggest shareholders, Accident Compensation Corp, with 7.5%, and AMP Capital Investors, with 5.2%, refused to say if they would sell their shares to Haier - or even if they discussed the possibility with representatives from the Chinese company last weekend.
F&P chairman Dr Keith Turner told NBR ONLINE an offer is expected within days.
"The fact that they approached major shareholders over the weekend is a sign that they have some intention. That's why we have released that information to the market.
"I would anticipate it would be a few days rather than weeks."
He says Haier's directors are in the country and no further due diligence is being done on top of the information released to the stock exchange this morning.
Haier's expression of interest should be no surprise, he says.
"Any company that holds 20% and is in the same sector as the company they own a part of, there's always an interest in what more they can do.
"We've been in discussion with them for the last few weeks. The sector does appear, globally, to be in a recovery phase so, again, at a sector level it's not a particular surprise."
Once an offer is received, F&P has 14 days to make a target company statement to shareholders.
It is advising shareholders against selling until that statement has been made.
The two companies have had a growing, arms-length commercial partnership since 2009, when Haier bought its 20% stake.
F&P now distributes Haier appliances in New Zealand and Australia, while Haier buys Fisher & Paykel's production machinery and technology.
"The two companies have worked well together in the last three years," Dr Turner says.
"They're a cornerstone customer in components and technology – and a shareholder to boot."
F&P recently announced it is reviewing manufacturing operations, including its Auckland factory.
In mid-2006 F&P shares were worth almost $3, but they dropped steadily to below 50c in 2009. The value has not hit $1 since late 2008.
BUSINESSDESK: Fisher & Paykel Appliances says 20% shareholder Haier of China has indicated it may offer to buy the whole company and has approached three other major investors.
No price was given for the possible takeover, which Auckland-based F&P Appliance says would represent a premium to the current share price. It was described as a potential cash offer subject to conditions.
Shares of the manufacturer of ovens, fridges and dishwashers have soared 108% this year and last traded at 75 cents, valuing the company at $543 million.
Haier has asked to undertake limited commercial and financial due diligence and the target company subsequently provided an extract from its five-year strategic plan.
That was released today after Haier advised F&P Appliances that it would approach three of the largest shareholders over the weekend regarding the possible takeover offer for the company.
Among the F&P's biggest shareholders is Orbis Investment Management with 17%, Accident Compensation Corp with 7.5% and AMP Capital Investors with 5.2%, which would bring Haier within reach of a 50% controlling stake.
The strategic review gives a forecast for 2013 capital expenditure of about $42 million while net debt will be "well below the $65 million as at March 31 this year, excluding the finance business".
The Chinese company injected much-needed equity in F&P Appliances as part of a $200 million rights issue in 2009, when the New Zealand company was forced to raise funds to repay bank debt.
Since then, the local company has taken over distribution of Haier products in Australia.
The company reiterated its forecasts given in August for full-year operating earnings before interest and tax would be $70 million to $78 million, made up of ebit from Appliances' of between $35 million and $40 million and earnings from Finance of $35 million and $38 million.
The company's strategic review shows a concerted push to monetise licensing of its technology including its direct drive motors and compressors.
It gave a 2017 target for earnings in North America rising to $US20 million on an ebit basis from about $US1 million in 2012.
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Comments and questions21
Now we will be able to blame shonky dish drawers on the Chinese!!
We eat you up and spit you out.
How do you acquire a NZ company cheap?
Let them expand overseas and watch them blow up first.
Fletcher Challenge, Warehouse, Air NZ, Telecom, Wrightson, Pumpkin Patch - the list goes on and on.
But white trash New Zealanders will always argue it's okay for NZ companies to make acquisitions overseas but not for overseas companies, especially Asians, to acquire in NZ.
Hence, the loser mentality which means NZ keeps going backwards.
If you guys are so smart, why did you take communism as the road to capitalism? You had to adopt OUR economic system in order to get ahead.
As for eating us up, show a little gratitude for the people who are helping to keep China fed without risk of poison or fraud (unfortunately some Chinese can't be trusted to do this). Mind you, the current Chinese leadership should be commended for securing food supply, previous Chinese governments used the starvation of millions as a political outcome.
You mean just like your forefathers using genocide in colonies to get rid of the local population?
Which forefathers would those be? Ones from the 1760s, or yours in the 1960s?
Interesting comment Pablo. Lives were just as valuable in 1760 as 1960 or today. So are you implying that we've improved since then? I won't dispute wars but I can't think of an example of British colony engaging in genocide in any geography. The biggest distinction I note however is that CCP engaged in violence against its own citizens in order to consolidate power.
Try the aborigines in Australia for a start.
Think of the slave trade and the decimation of whole communities in Africa.
Think of Hitler and the Jewish solution.
Then, there's Bosnia.
Want some more example of the European forefathers?
@Dragon, you're casting a wide net there. Are all European forefathers my forefathers? Answer to rhetorical question: No. And, none of your examples are relevant to a discussion about capitalism in NZ and China.
The only 'example' you provided that actually relates to the issue of genocide was 'Hitler and the Jewish solution'. The real issue there is that in the absence of democracy, selfish individuals will use any means necessary to consolidate power. That applies universally, including Hitler and Mao, and has nothing to do with the fact that you love China and don't respect NZ.
My ethnic background is diverse, I support free trade, I believe in cross-border investment. And despite what many people seem to think, national protectionism is bad, regardless of where you are from. And, one commercial entity acquiring another commercial entity does not translate into a sovereign issue just because one of them happens to be Chinese.
@Dragon this is a similar problem with many 'western' style nations. Especially including Australia. China has become a major trading partner yet it is popular to be protectionist or anti-China. Free trade is good for everyone. Investment, including foreign investment, should be encouraged.
New Zealanders love to buy at the top of any markets, using debt and then, sell at the bottom of the markets.
Almost painful to watch New Zealanders buy up properties in Fiji, Gold Coast and of course, their second property in a coastal/holiday area in NZ.
All using debt, of course.
FPA hasn't traded at $1.30 today (see your update). Highest value trade today has been $1.05, currently 98c.
From the moment Haier bought 20% of FPA their destiny was to buy the whole company. There was no other reason for the Haier buy-in. FPA has world-beating IP and Haier are just beating the other big manufacturers to it. We'll probably just give FPA it away for a song..as usual.
I guess if you are a major shareholder you can have a say in it.
But of course - that's NZ style - buy high and sell low.
If you don't like the offer (when it is actually issued), then don't sell your shares. I presume you have shares to sell and aren't whinging needlessly about economic nationalism without the temerity of backing up your thoughts by actually owning a slice of F&P.
As for me, I picked up some stock at the beginning of the year. I'd like to think F&P Appliance could regain their clout from ten years ago, but if they can't do it without help, then all power to those who can do better with the company.
The 'old gaurd' won't sell... this is one way to sell 'off' shares at a premimum (merry xmas)
- it should be noted that the only consistantly profitable part of that business is FPF
I really hope that the old guard, as #17 calls them, do not sell. There is plenty of untapped value in F&P, and it would be tragic to not have some of it come to NZ investors and the founding family.
lovely to see the Kiwi's reacting to tongue in the cheek Dragon!
So what should a shareholder do? Take the bird in a hand so to speak, or hope for an offer to be formalised. And what might that value be?
keep buying is my guess, it will hit $2 before they let it go.
New to the world of investments here... What has the general trend for the NZ market been in terms of mergers and acquisitions in the last decade? Have we really been buying high and selling low as #12 said?