Haier’s bid for F&P best example for partnership with China
Chinese company Haier’s bid for iconic Kiwi manufacturer Fisher & Paykel Appliances could be the best example of a successful business partnership with the world’s largest market.
That is the view of David Mahon, a Kiwi expat investment manager living in China who is back home giving advice on how to do business with China.
Haier, which already owns 20% of F&P, has tabled an offer of $1.20 a share, a $696 million bid valuing the company at just under $870 million.
Populist reaction has centered on fears manufacturing jobs and a successful Kiwi brand will be lost if Haier succeeds in taking ownership of F&P.
But Mr Mahon regards the potential deal as a success story in terms of doing business with the giant Asian economy.
“Who owns F&P is not the issue,” Mr Mahon said to NBR ONLINE.
“Since Haier bought the 20% stake, F&P has formed a positive partnership with what is now the world’s most powerful appliance manufacturer that will ultimately create more high-end employment in New Zealand and makes a name for a New Zealand brand.”
Speaking on TVNZ’s Breakfast show this week, Mr Maier said Haier valued F&P’s technological expertise and soon, across China, ‘Fisher products’ will be pitched as the most expensive, high-end appliances, and New Zealand’s name and reputation will run with those.
“So, who owns Fisher & Paykel eventually, I don’t think matters.”
Mr Mahon says New Zealand’s sensitivities about foreign investment needed to change.
Negative rhetoric about investment from China in particular could damage New Zealand’s relationships with the mega-economy.
“Money is agnostic really, it comes into our economy from any culture. It’s good for New Zealand we don’t have the resources ourselves to make the same kind of adjustments and investments,” he said on Breakfast.
“The Crafar Farm deal, for instance, was simply converting Australian debt to Chinese equity. Those assets had already gone offshore.”
Mr Mahon told NBR ONLINE he thought F&P had always shared the China philosophy that lots of smaller companies did not grasp.
“Kiwis have a sense that I grow it, I own it,” he said.
Although we are a country of incredibly creative engineers – A J Hackett Bungy and LanzaTech were given as examples – our commercialisation skills were often not strong enough.
“What we don’t have is deep pools of capital, so we need to find investors to develop the potential we have,” Mr Mahon said.
“And we should be looking to those countries which can invest in New Zealand and give us the resources to fulfill our potential as an economy.
‘If we continue to keep going to New York and Europe for business we are swimming against the tide,” he said.
“Simply because Chinese culture is so different, we don’t have to fear them. We didn’t fear Australian money coming in over the decades, or the British or the US.
“There’s no reason to fear China. They are critical to our success in the future.”
New horizon – New Zealand a southern Asian economy
Mr Mahon, a former carpet layer whose private equity and investment advisory firm is prominent in foreign M&A transactions in China’s agricultural, manufacturing and technology sectors, has strong views on how to do business with China - his home for the last 30 years.
Two years ago Mr Mahon criticised the New Zealand business community for its lack of focus on China.
He said New Zealand was not taking full advantage of the Free Trade Agreement with China, signed in 2008, and said government policy was not to blame.
Rather, it was failure of the private sector to recognise the extraordinary relationship with the world’s largest market - one forged by 40 years of consistent diplomacy - and recent perceptions in Asia of New Zealand as one of the only truly non-aligned developed countries.
Although passive trade figures were strong around commodities such as logs and whole milk powder, value-added products were not being created.
But, two years on, Mr Mahon now thinks that is changing and says the situation is much better.
Kiwi companies are starting to recognise the importance of China and are going into the market more sensibly.
“There’s a recognition now that we are a southern Asian economy,” Mr Mahon said.
“Crippled by sovereign debt, Europe and the US face up to a decade of economic stagnation. Asian countries are going to be the economic engines for the rest of our economic lives.”